In an asset sale you hire everyone on day one.

In an asset purchase the employees do not travel with the equipment. The seller terminates the workforce at closing. Your entity hires the people you choose, the same instant. So offer letters, tax forms, payroll enrollment, health coverage and workers’ compensation must exist before you close, not after. Miss the first payroll and you lose the workforce you financed.

What actually happens to the employees when I buy the assets?

In an asset purchase, employment does not transfer by itself. Each employee’s relationship is with the seller entity, and you are not buying that entity. The seller terminates the workforce effective at closing, and your buyer entity offers new employment to the people you want, effective the same instant. Everything below follows from that mechanic.

A few statutes treat you as a successor for narrow purposes, each on its own conditions. One cuts against you. If the workforce is unionized, hiring a majority of the seller’s employees into substantially the same operation can make you a successor with a duty to bargain, though you are generally not bound to the seller’s labor contract unless you adopt it. Some states and cities also mandate retention in particular industries.

Law: NLRB v. Burns International Security Services, 406 U.S. 272 (1972); Fall River Dyeing and Finishing Corp. v. NLRB, 482 U.S. 27 (1987); state and local retention statutes.

What employment paperwork has to exist before closing, not after?

Offer letters should be delivered and signed before closing, and expressly contingent on the closing happening. Form W-4s, benefit enrollment elections and payroll-system setup belong in the same pre-closing batch. Form I-9 handling is a decision you make in advance, because you either collect new forms or you obtain and keep the seller’s.

• The offer letter. From the buyer entity: pay, start date, at-will status where your state allows it, lapsing if the deal dies.
• Form I-9. New forms, or the seller’s under the successor rule below.
• Form W-4. New ones, unless your accountant clears the alternate procedure below.
• Payroll enrollment. Employer identification number, withholding and unemployment registrations, direct deposit verified, first pay date scheduled, new-hire reporting queued.
• Benefit enrollment. Your plan effective at closing, forms already returned.

On the immigration forms the regulation gives you a choice. Someone who continues employment with a related, successor or reorganized employer needs no new Form I-9, and that reaches a buyer keeping some or all of a previous employer’s workforce in an asset sale. The condition is that you obtain and maintain the seller’s forms, errors included. If you start clean instead, do it for everyone without regard to citizenship or national origin, and mind the trigger: the first day of employment with your entity is the closing, so section 1 is due that day and your review by the third business day after.

Law: 8 C.F.R. 274a.2(b)(1)(viii)(A)(7); 8 C.F.R. 274a.2(b)(1)(i)-(ii).

What happens if the first payroll after closing is late?

A missed first payroll is the fastest way to lose the workforce you just financed. The employees have no contract with you, no history with you, and no reason to extend credit to a stranger. Your lender funded a business whose value is the people who show up. Payroll timing is a closing condition.

So name a date. Choose the first pay date before you sign, ask the provider in writing how many business days it needs to open the account and fund the run, and treat that as a constraint on the closing date. Then decide who pays for which hours if closing lands mid period.

Your employees will forgive a new sign on the door. They will not forgive a missing direct deposit.

Will I pay employer Social Security tax twice in the same year?

You will, on your higher-paid staff, unless you qualify as a successor employer and get the seller’s wage figures. The Internal Revenue Code lets a successor count wages the predecessor already paid an employee toward that employee’s annual Social Security wage base. Without that carryover, your entity restarts every employee at zero on the closing date.

The rule is narrow. You must acquire substantially all the property used in the seller’s trade or business, or a separate unit of it, and immediately after employ someone employed there immediately before.

Law: 26 U.S.C. 3121(a)(1); 26 C.F.R. 31.3121(a)(1)-1(b).

Now the money. For 2026 the wage base is $184,500, and the maximum tax each side pays is $11,439. Take a manager the seller already paid $120,000 before an August closing. Without the carryover you pay employer tax on that $120,000 again, roughly $7,400 on one employee. The employee’s duplicate withholding comes back on the individual return. Yours does not.

Reporting is separate from entitlement. Under the standard procedure each employer reports the wages it paid. Under the alternate procedure your Forms W-2 as successor may include amounts the seller reported on its Forms 941, with each party filing Schedule D (Form 941). Either way you need the seller’s per-employee detail and its agreement to file its side. Successor status is worth nothing if the seller stops answering email, so make it a covenant with a deadline.

Law: Rev. Proc. 2004-53; Instructions for Schedule D (Form 941). Source: Social Security Administration 2026 wage base announcement; the base changes annually, so confirm the year you close.

Who has to provide COBRA to the seller’s former employees?

It can land on your plan. Under the COBRA regulations, if the selling group keeps a group health plan after the sale, the seller’s plan keeps the obligation to the M&A qualified beneficiaries. If the selling group drops all group health coverage in connection with the sale, a buying group plan can inherit it.

The condition on you is that you continue the business operations associated with the purchased assets without interruption or substantial change. That is a live risk, because a typical individual seller shuts the plan down at closing. The beneficiaries are people whose qualifying event came before or in connection with the sale and whose work was associated with the assets you bought.

The regulations let the parties allocate that responsibility by contract, but the allocation does not relieve the party the regulation puts it on if the other side fails to perform. So allocate it in writing and do not treat it as insurance. At this size the seller is usually an individual and representation and warranty insurance is uncommon, so the allocation is worth what that person can pay later.

Law: 26 C.F.R. 54.4980B-9, Q&A-3, Q&A-7 and Q&A-8(c).

Your own coverage is separate. Ask your broker in writing for a policy effective at closing, whether waiting periods can be waived, and whether the carrier will start mid-month, because many small-group carriers start only on the first. Federal COBRA’s reach turns on employer size in the preceding calendar year, and many states reach smaller groups.

Do I have to give WARN notice if I buy the assets and hire everyone?

Probably not, but read the sale-of-business rule anyway. Federal WARN reaches employers with 100 or more employees excluding part-timers, or 100 or more who together work at least 4,000 hours a week exclusive of overtime, and it requires 60 calendar days of notice. Most businesses bought this way sit under the thresholds.

Scale matters more than the headline number. A covered plant closing is a shutdown of a single site, or a unit within it, causing employment loss for 50 or more in 30 days. A covered mass layoff generally means 50 or more at a single site who are also a third of the workforce, or 500 or more.

The statute deems employees of the seller as of the effective date, other than part-time employees, to be employees of the buyer immediately after. So the sale by itself creates no employment loss. The seller gives notice up to and including the effective date. You give it after.

Law: 29 U.S.C. 2101(a), 2101(b)(1), 2102(a); 20 C.F.R. 639.4(c), 639.5.

Read that as a buyer. Cut staff two months after closing and the headcount you are measured against includes the people the statute deemed yours. Several states also have notice acts reaching smaller employers, Illinois and New Jersey among them.

Which day-one items quietly need weeks of lead time?

Workers’ compensation in the buyer entity’s name, a state unemployment insurance account, an answer on accrued paid time off, and any restrictive covenants you want signed. None can be produced on the closing morning. All are invisible until they fail, which is why they surface late.

Whether you inherit the seller’s experience rate is a state law question, and it changes the cost of every payroll. Federal law conditions a state’s experience-rating credit on its system and requires transfer where the same interests own or control both businesses. In arm’s-length sales states differ, and some make transfer optional. Ask the agency for your rate before you model.

Law: 26 U.S.C. 3303, including 3303(k); state statutes and your state agency’s transfer-of-experience guidance.

Accrued time off is either paid out by the seller with the final wages or assumed by you and credited against the price. Silence is the indefensible answer, and whether accrued vacation is a vested wage at termination differs by state.

Do the seller’s employee noncompetes come with the assets?

No, not by themselves. A noncompete signed by an employee runs to the seller entity as a contract right. You get it only if the purchase agreement assigns it, the document permits assignment, and the state lets an assignee enforce it. Even then enforceability turns on facts. Do not assume the old file protects you.

The clean path is your own paper. Make signing your confidentiality, non-solicitation and, where lawful, non-compete agreement a condition of the offer. Ask three months later and you are asking for something and offering nothing. Confirm what the state permits as of the date you sign, because several states ban or limit employee noncompetes.

What does my SBA lender need to see, and how current is the SBA rulebook?

Your lender applies the version of the SBA’s operating procedure in force when your loan number issues, not when you signed the letter of intent. Stated as of late August 2026, SOP 50 10 8 governs loans numbered on or after June 1, 2025, and SOP 50 10 8.1 governs loans numbered on or after October 1, 2026.

Source: SBA Information Notice 5000-866746 (SOP 50 10 8, loans numbered on or after June 1, 2025; technical updates version effective the same date); SBA notice 5000-880695 (SOP 50 10 8.1, published August 14, 2026, effective October 1, 2026); SBA Procedural Notice 5000-876626 (citizenship and residency, effective March 1, 2026).

The SBA revises mid-cycle by notice. So confirm the current version yourself rather than trusting a date in any article, including this one, and ask which version applies to your file.

Two employment-adjacent asks for your lender, in writing, early. First, which insurance certificates it requires as closing conditions, and in whose exact legal name. Second, what the SOP in force for your loan permits on the seller’s post-closing role, before you promise the seller a title, a consulting agreement or payroll. Nobody can promise how the SBA or your lender will decide.

What should I do in the next two weeks?

Build a day-one employment checklist with real dates, working backward from your target closing date. The order below works because each item depends on the one above it. Put a name on every line, and put the seller’s cooperation duties into the purchase agreement rather than a phone call.

• Now. Get the census: hire dates, pay rates, year-to-date wages, accrued time off, union status, who signed an agreement. Ask for the I-9 file.
• Now. Ask the payroll provider how many business days a first payroll needs, and the broker for a quote effective at closing.
• Four weeks out. Register for federal and state withholding and unemployment. Order workers’ compensation in the entity’s exact name.
• Three weeks out. Settle three points in the agreement: accrued time off, COBRA for the seller’s qualified beneficiaries, wage-reporting cooperation.
• Two weeks out. Deliver offer letters, W-4s, I-9 instructions, enrollment forms, confidentiality agreement. Collect signatures.
• One week out. Load payroll, verify direct deposit, confirm the first pay date in writing.
• Closing day. Coverage effective at 12:01 a.m. Hold a fifteen-minute all-hands: pay date, insurance start date, who to call.

The mechanic is unforgiving but not complicated. The seller terminates. You hire the people you chose. The paperwork proves it. Do it before the wire and day one is a normal Monday with a new name on the pay stub.