If you're purchasing a business or its assets, Louisiana law may hold you personally responsible for certain unpaid taxes owed by the seller. Taking a few simple steps before closing can help protect you from successor liability.

What Is Successor Liability?

Successor liability is the personal liability that may be imposed on the purchaser of a business, a portion of a business, or business assets when the purchaser fails to comply with Louisiana's business-transfer requirements.

If the purchaser does not withhold sufficient purchase funds and the seller has unpaid Louisiana tax liabilities, the purchaser may become personally liable for the seller's unpaid:

• Taxes
• Interest
• Penalties

Your liability is generally limited to the value of the purchase price or other consideration paid for the business.

Before You Buy a Business

Before completing the purchase:

• Require the seller to obtain an LDR Letter of Good Standing before closing the transaction.
• Verify the seller has filed all required Louisiana tax returns.
• Determine whether outstanding Louisiana taxes are owed.
• Withhold sufficient purchase funds if required by law.
• Keep copies of all tax clearance documents and closing records.
• Do not use the seller's existing Louisiana Revenue Account Number or tax accounts after the purchase.
• Register the purchasing entity for its own Louisiana tax accounts before beginning operations.
• Consider consulting a tax professional or attorney before completing the purchase.

Quick Checklist

Before closing the transaction, make sure you have:

☐ Required the seller to provide an LDR Letter of Good Standing.

☐ Confirmed the seller has filed all required Louisiana tax returns.

☐ Determined whether any Louisiana taxes remain unpaid.

☐ Withheld sufficient purchase funds, if required.

☐ Registered the purchasing entity for its own Louisiana tax accounts.

☐ Retained copies of all closing documents and tax certifications.

☐ Reviewed the purchase agreement and supporting documentation.

Did You Know?

Even if your purchase agreement states that the seller is responsible for unpaid taxes, Louisiana law may still hold the purchaser personally liable if the statutory successor liability requirements have not been satisfied.

Important

A purchaser should not continue operating under the seller's Louisiana Revenue Account Number, sales tax account, withholding account, or other LDR tax registrations.

The purchasing entity must register the new ownership or purchasing entity with LDR and obtain its own tax accounts before filing returns, collecting tax, or remitting payments.

Using the seller's existing Louisiana tax accounts may result in:

• Returns and payments being applied to the wrong taxpayer.
• Notices being issued under the former owner's account.
• Delays in establishing the purchaser's tax accounts.
• Additional compliance and successor liability issues.

How Can I Avoid Successor Liability?

1. Require the Seller to Obtain a Letter of Good Standing

Before purchasing a business, require the seller to obtain an LDR Letter of Good Standing.

The Letter of Good Standing confirms whether the seller has satisfied the Louisiana tax requirements necessary for LDR to issue the certification.

Because Louisiana tax information is confidential, only the taxpayer (seller), or a person authorized by the seller, may request a Letter of Good Standing. LDR cannot release the seller's confidential tax information directly to a prospective purchaser.

If the seller cannot obtain a Letter of Good Standing because taxes are owed or required tax returns have not been filed, Louisiana law may require the purchaser to withhold sufficient purchase funds to cover the outstanding tax liability.

Do not rely solely on verbal assurances that the business is current with its Louisiana tax obligations.

2. Keep Complete Records

Maintain copies of:

• Letter of Good Standing
• Purchase agreement
• Closing statement
• Disclosure authorizations
• Records of withheld funds
• Proof of payments
• Correspondence with LDR
• Other transaction documents

Keeping complete records may help resolve future questions regarding the purchase.

What Is Included in the Purchase Price?

For successor liability purposes, the purchase price or consideration may include:

• Cash paid or payable.
• Assets transferred.
• Debts assumed.
• Debts forgiven.
• Property exchanged.
• Stock or ownership interests.
• Other value transferred as part of the transaction.

LDR considers the substance of the transaction—not merely its title—when determining whether successor liability applies.

What Types of Business Transfers May Be Reviewed?

Successor liability may apply to:

• Purchase of an entire business.
• Purchase of part of a business.
• Asset purchases.
• Inventory purchases.
• Stock or ownership-interest transfers.
• Gifts.
• Donations.
• Exchanges.
• Debt assumptions.
• Transfers between related parties.
• Other changes in ownership or control.

Changing the form of the transaction does not necessarily avoid successor liability.

Seller Responsibilities

A seller who transfers or closes a business must:

• File all required final Louisiana tax returns.
• Pay all taxes due.
• Resolve any outstanding tax liabilities.

A business owner who later opens a similar business under the same ownership may remain liable for unpaid taxes, interest, and penalties associated with the original business.

Before You Close

Before finalizing the purchase, confirm that:

• The seller has provided you with an LDR Letter of Good Standing.
• All required Louisiana tax returns have been filed.
• Any outstanding tax liabilities have been identified.
• Sufficient purchase funds have been withheld, if required.
• The purchasing entity has registered for its own Louisiana tax accounts.
• You have retained copies of all supporting documentation.

Recommendation

Require the seller to request an LDR Letter of Good Standing as early as possible in the sale process. Waiting until closing may delay the transaction if outstanding tax liabilities or unfiled returns must first be resolved. Reviewing the Letter of Good Standing before closing can help you determine whether purchase funds should be withheld under Louisiana law.

What If I've Already Purchased the Business?

If you purchased a business without obtaining a Letter of Good Standing:

1. Contact LDR immediately.
2. Review your purchase agreement and closing documents.
3. Determine the total purchase price or other consideration transferred.
4. Gather records related to the purchase.
5. Provide any documentation requested by LDR.
6. Consult a qualified attorney or tax professional regarding your potential liability.

Prompt action may help resolve the matter more efficiently.