The purchaser of a business typically negotiates to buy the assets free and clear of title defects, also referred to as liens. The first step in that process is to determine what liens exist on the assets. The standard method to determine that is to conduct a search of the Uniform Commercial Code Financing Statement records in the state where the seller is organized. This is often referred to as a UCC Search. However, not all liens on assets are filed in the UCC Records. Although most liens are recorded with a state’s UCC records, liens on other assets must be recorded elsewhere, and this varies state by state. For example, most states require that liens on vehicles (including trucks and any other titled equipment) be recorded in the state’s motor vehicle or transportation department records. Liens on boats and airplanes are often filed with a state’s equivalent of a department of natural resources and the Federal Aviation Administration, respectively. There are other filing places where liens are not required to be filed, but are often filed to provide additional notice of the liens to the public and the governing authority. For example, liens on liquor licenses are often filed with the local liquor board. The bottom line is that if you intend to take the seller’s assets free and clear of liens, make sure that you understand what the specific assets are, where liens are required to be filed and that you conduct adequate searches of those filing places.
ABOUT GLENN D. SOLOMON
Glenn D. Solomon Esq., is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 120 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eight offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.
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