What to sort out before closing
- Pull your current Georgia unemployment tax rate and confirm every quarterly report and payment is in.
- Agree with the buyer whether it is taking substantially all of the business and keeping it running.
- For a partial sale, agree whether to ask for a partial transfer and file the joint application in time.
- Tell the Department of Labor about the sale and the date your company stopped paying wages.
- Put who pays the final quarter's unemployment tax in the purchase agreement.
Dates to know: A partial transfer needs a joint application signed by you and the buyer within two calendar quarters after the sale.
Why Your Rate Has Value
Every Georgia employer pays state unemployment tax on its payroll, at a rate set partly by its history. A company whose former employees have drawn few benefits often has a lower rate than a new employer. A company with many layoffs can carry a higher one.
When you sell, the buyer will want to know which rate it gets. For a staffing firm or a cleaning company with a big payroll, the difference can matter to the buyer's numbers, and so to your price.
When the Buyer Becomes a Successor
Georgia treats a buyer as a successor when it acquires substantially all of an employer's trade, business or assets and keeps operating it. A successor takes over the seller's experience rating record, and the rates are recalculated as of the transfer.
The Department of Labor's rules say a transfer of 90% or more of the business or its assets creates a presumption of successorship. The Department also looks at whether the same workforce, the same location and the same customers continued after the sale.
That means a typical asset sale of a whole company, where the buyer keeps the staff and the doors open, usually moves your history to the buyer, good or bad.
When the History Does Not Move
Federal law and Georgia's rules block transfers made mainly to dodge a high rate.
If a buyer that was not already an employer acquires a business mostly to get its lower rate, the Department can refuse the transfer and give the buyer the rate for new employers.
This rarely touches an ordinary sale of an operating company. It is aimed at shell deals. Your attorney will know if your situation raises the question.
Selling Only Part of the Company
Some owners sell one division or one location and keep the rest. Georgia allows the experience tied to a clearly separate part of the business to transfer to the buyer, but only if both sides agree.
That takes a joint application, signed by both seller and buyer, filed with the Department of Labor within two calendar quarters after the acquisition.
Miss the window and the partial transfer may not happen. Put the decision and the deadline in the purchase agreement.
What This Means for the Price
Buyers who take on your history want to see it. Expect requests for your rate notices and recent quarterly reports. A clean, low rate is a small plus. A high rate from past layoffs is a cost the buyer will think about.
This is also a reason to keep payroll steady while you sell. Laying off staff before a sale can raise the rate the buyer inherits, and it makes the business look weaker. Our page on business valuation before you sell covers why steady performance matters.
Telling Your Staff
In most asset sales the buyer hires your employees on its own payroll the day after closing. Employees often worry about pay, benefits and seniority. Plan the announcement with the buyer so people hear it from you together, framed as continuity.
Unpaid Unemployment Tax
A successor can also be responsible for unemployment taxes the seller owes. Buyers protect themselves the same way they do for sales tax: by holding back part of the price until the seller shows the account is paid.
File and pay every quarterly report through the closing date so nothing is left open.
Your Georgia Department of Revenue accounts are separate from the Department of Labor. The TSD-10 tax clearance guide covers sales and withholding tax.
Wrapping Up Your Own Account
If your company stops paying wages after the sale, tell the Department of Labor and file the last quarterly report. Keep the company's records. If a former employee files a claim later, the Department may still contact you.
You may also need to wind up the company itself after an asset sale. See the Certificate of Termination guide, and the full list of Georgia tax and filings guides.
This guide is general information, not tax or legal advice. Confirm how the rules apply to your sale with your CPA or attorney.
Sources include the Georgia Department of Labor's employer rules on successorship and partial transfers, and Georgia's unemployment law on succeeding employers.
Curious what your company is worth to a buyer? Send the form or call (404) 555-0139.