A person selling a business in Sacramento might have offered promotional discount programs shortly before listing the business. In an effort to survive COVID-19 closures, many businesses have turned to Groupon, Living Social, and other third-party "deal" websites. The concept is simple: a consumer purchases a gift certificate with face value of $50 for the reduced cost of $30. The vouchers, or gift certificates, are handled differently depending on deal website. Most businesses do not receive any money until the gift certificate or voucher is actually redeemed at the business. However, some of these deal websites will give the business some or all of the money at the time the gift certificate is purchased by the consumer. This can cause tremendous issues for the person buying the business because they will be obligated to honor the deals. Hence, its a good idea to include a provision in the purchase agreement where the seller covenants that no discounts or promotional deals were offered in the last six months. Another good option is to search these deal websites for any evidence that these discounts may have been offered at any point in time.
The California Secretary of State provides services for Uniform Commercial Code ("UCC") inquiries. A UCC filing gives the public notice that a creditor has an interest in personal property of a debtor. A creditor accomplishes the notice by filing Form UCC-1
. A person buying a business in Sacramento should consider performing a UCC search for any filings involving the seller or the seller's business. Meeting a surprise creditor shortly after purchasing a business would be terrible. Hence, its also good practice to search UCC Connect
for UCC inquiries and filings.
A buyer can help protect themselves further by including a provision in the agreement that all tangible property is valid with marketable title free of liens and encumbrances.