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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4027
Experience:  35 years tax experience, including four years at a Big 4 firm.
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A Texas individual purchased all the memberhip interest of

Customer Question

A Texas individual purchased all the memberhip interest of an LLC formed in Texas. The LLC being purchased was acquired on 4/1/16. Upon the purchase of the name and membership interest it was found that the LLC had forfeited its right to do business for failure to file taxes. The forfeit was on 2/21/14 but was unknown to the buyers until after the transaction. Is the sell valid? is it null and void? the total is $650,000

Submitted: 3 months ago.
Category: Tax
Expert:  PDtax replied 3 months ago.

Hi from just answer. I'mCustomer I'll assist.

Without looking at the contract, I would say it depends.

It depends if the LLC was an integral part of the contract, and that the purchasers intent to continue operating was part of the contract. The seller typically warrants that the entity is current with tax filings, licenses, etc. Failure of those terms is a breach, and the contract could be unwound, or be voidable, or honored with damages.

As an example, perhaps the purchaser just wanted assets. The LLC tax status might not matter at all, and the contract honored.

Thanks for asking at just answer. Positive feedback is appreciated when you rate my response. I'mCustomer