An asset sale ends employment and you rehire.

In an asset purchase you do not inherit the workforce. Employment with the seller ends at closing, and everyone working there the next morning works there because you made an offer and they accepted. Four federal obligations follow: plant-closing notice, continuation health coverage, employment eligibility verification, and payroll tax reporting. The first one starts sixty days before closing.

Does the buyer inherit the seller’s employees in an asset purchase?

No. In an asset purchase the buyer acquires identified assets and assumes only the liabilities it agrees in the asset purchase agreement to assume. Employees are not assets and are not conveyed with them. Employment with the selling entity ends at closing, and the buyer becomes the employer of each person it hires, by offer and acceptance.

That structure drives the rest. You are a new employer: new entity, new employer identification number, new tax accounts, your own offer letters and pay rates.

The rule has edges, and they run against you. Hire a majority of the seller’s union-represented employees into substantially the same operation and federal labor law can make you a successor with a duty to bargain. Successor liability doctrines reach some employment claims despite an asset structure. And coverage under several statutes turns on headcount across the current or preceding calendar year, so not every duty starts at once.

Two consequences follow. Accrued vacation and final wages arise out of the seller’s employment relationship, and whether state wage law makes the seller pay them out at termination moves the closing adjustments. And the plant-closing statute deems the seller’s employees, other than part-timers, to be yours immediately after the sale, for notice purposes only.

Law: 29 U.S.C. 2101(b)(1); 20 C.F.R. 639.6; Fall River Dyeing and Finishing Corp. v. NLRB, 482 U.S. 27 (1987).

Who gives WARN notice when a business is sold, the seller or the buyer?

The federal Worker Adjustment and Retraining Notification Act splits responsibility by the effective date of the sale. The seller is responsible for notice of any plant closing or mass layoff up to and including that date. The buyer is responsible for any that takes place after it. The regulation states the same allocation in nearly identical terms.

The rule is 60 calendar days of written notice to affected employees or their representatives, the state dislocated worker unit, and the chief elected local official where the closing or layoff will occur. WARN reaches employers of 100 or more employees, counted without part-timers, and only where employment losses at a single site cross defined numbers inside a 30-day window. Most businesses in this range sit below that line, which is why buyers skip the analysis.

Count the heads first: by site, off the seller’s payroll, not your projected staffing. Part-timers are excluded from the threshold counts but are still owed notice.

Law: 29 U.S.C. 2101(a)(1)-(3), 29 U.S.C. 2102; 20 C.F.R. 639.4(c), 20 C.F.R. 639.6.

Can a buyer that hires none of the seller’s employees still owe notice?

Yes, and this is the case first-time buyers miss. Under the statute, a person employed by the seller as of the effective date of the sale, other than a part-time employee, is considered an employee of the purchaser immediately after that date. If you then do not employ them, the employment loss falls on your side of the line.

The regulation is explicit that a technical termination may be deemed to occur when the sale becomes effective, but notice is required only where employees in fact experience a covered employment loss. The sale itself is not the event. The staffing decision is. The Eighth Circuit read the same provision to presume the buyer is the WARN employer where the seller still employs its people on the day of sale, and held a seller does not violate it by failing to extract a commitment to hire them. That protection for the seller is exposure for you.

Apply it. You buy a two-location services business, plan to consolidate and staff it yourself, and tell no one. The seller gave no notice because nothing happened before the effective date. You gave none because you were not yet the employer. If the thresholds are met, the gap is no defense.

The decision not to hire is not a way around the notice question. It is the notice question, and it has to be answered sixty days before closing, not at closing.

Several states have plant-closing statutes of their own, some reaching smaller employers, some requiring more than sixty days, some adding content requirements. Check every state where the seller has employees, and check early: a longer state period moves your closing date.

Law: 29 U.S.C. 2101(b)(1); 20 C.F.R. 639.6; Wilson v. Airtherm Products, Inc., 436 F.3d 906, 911-12 (8th Cir. 2006).

Who owes COBRA continuation coverage after an asset sale?

Federal continuation coverage lets a person who loses group health coverage because of a qualifying event elect to keep it for a statutory period, at their own cost. It applies only to plans of employers that normally employed 20 or more employees in the preceding calendar year. Below that line, state continuation law governs instead.

Test that threshold first; many businesses in this range never cross it. Where it is crossed, the acquisition regulation makes the sale a qualifying event for covered employees whose employment was associated with the purchased assets, unless the buyer is a successor employer that employs them immediately after and they keep coverage.

The default is that the selling group’s plan carries the obligation. The exception is the trap. Where the selling group ceases to provide any group health plan to any employee in connection with the sale, and the buyer is a successor employer maintaining a plan, the buyer’s plan owes coverage to the acquisition-related qualified beneficiaries.

In a small asset sale the selling entity often has no employees the day after closing and ends its plan there, the condition the regulation describes. It is not automatic. The test looks at the whole selling group, so a seller that keeps another business with a plan stays on the hook. I read the plan documents and the employee census, including anyone on leave or on continuation coverage, before the employment section of the agreement.

The regulation lets the parties allocate this by contract, but allocation does not relieve the party the statute obligates. An indemnity is a claim against a seller who may have spent the proceeds. It is not a defense against a qualified beneficiary, whose claim runs against a plan.

Law: 26 U.S.C. 4980B(d); 26 C.F.R. 54.4980B-2, Q&A-4 and Q&A-5; 26 C.F.R. 54.4980B-9, Q&A-6, Q&A-7 and Q&A-8.

Do you have to complete new Forms I-9 for the employees you hire?

You choose. A buyer that continues to employ some or all of a previous employer’s workforce after a sale of assets is a successor employer under the verification regulation, and may treat those hires as continuing employment, provided it obtains and maintains the previous employer’s records and Forms I-9. The alternative is to treat everyone as a new hire.

Each choice has a price. Keeping the seller’s forms is less work on day one, and you take them as they are, missing pages and expired documents included, and produce them on inspection. New forms reset the file to your standard and start a clock: Section 1 on or before the first day of employment, Section 2 within three business days after. Do that for everyone you hire from the seller, not a subset picked by intuition.

Law: 8 C.F.R. 274a.2(b)(1), including 8 C.F.R. 274a.2(b)(1)(viii)(A)(7).

Do wages the seller already paid count toward your payroll tax wage base?

They can. Where a successor employer acquires substantially all the property used in a trade or business of a predecessor, or in a separate unit of it, and immediately after the acquisition employs an individual who worked for the predecessor immediately before it, wages the predecessor already paid that individual that year count toward the successor’s Social Security wage base.

Without it your payroll system restarts every wage base at zero at closing and you pay employer-side tax on wages already taxed this year. The employee recovers the doubled employee share as a credit on the individual return. You do not recover yours. On a mid-year closing that is money out of the operating account when debt service is newest.

Reporting is a separate decision. The IRS has published a standard procedure and an alternate procedure for filing Forms W-2, W-3, 941 and W-4 where the successor acquires substantially all the predecessor’s property and employs its people in the same calendar year. They differ in who reports what at year end, and the guidance covers the schedule explaining acquisition-driven discrepancies between Forms W-2 and 941. Choose with your CPA before the first payroll.

Law: 26 U.S.C. 3121(a)(1); Rev. Proc. 2004-53.

Will the seller’s unemployment experience rating follow the business to you?

Unemployment experience rating is a state tax question sitting on a federal floor. Federal law conditions state programs on mandatory transfer of experience where the same interests substantially own, manage or control both businesses, and on refusing transfer where a person not already an employer acquired the business solely or primarily to obtain a lower rate.

In an arm’s length purchase from an unrelated seller there is usually no common ownership, so the federal mandate is not the operative rule and state law decides. Some states transfer the rating with the trade or business, some make it elective, some decide it on a checkbox in the registration form.

Here it cuts against you. A seller who laid people off has a rate built out of those claims, and inheriting it raises the tax on every payroll you run. Where transfer is mandatory you cannot decline it. The mirror image holds: a clean history may carry a rate below the new-employer rate. I ask for the seller’s most recent rate notice and the payroll register before anyone fills out a registration form.

Law: Social Security Act section 303(k), 42 U.S.C. 503(k); U.S. Department of Labor, UIPL 30-04.

Which day-one elections are actually choices, and what does each one cost?

Three of the four obligations turn on a decision you make rather than a term you negotiate. The table sets out what each option keeps and what it costs. Notice is not on the list, because notice is not elective. It is driven by headcount, by site and by timing.

The purchase agreement allocates risk between you and the seller. It does not tell a statute who the employer is. On day one, the statute decides.

What has to be finished before your first payroll runs?

Sequencing separates what must be finished before the first payroll from what can follow. Before that payroll: the entity exists and is registered, the tax accounts are open, offers are signed, the verification election is made, the reporting procedure is chosen, and the fate of the seller’s health plan is known in writing.

• Sixty days or more before closing. Count employees by site. Decide who you will not hire, because that decision is the event the notice statute measures. Check the plant-closing statute in each state involved.
• During diligence. Request the Form I-9 binder, the payroll register, the most recent state unemployment rate notice, the plan documents, the employee census, and a list of anyone on leave or on continuation coverage.
• Before closing. Open the employer identification number and the state withholding and unemployment accounts. Onboard the payroll provider. Sign offer letters effective the day after closing. Confirm in writing whether the seller’s plan ends at closing.
• Day one and the first weeks. The verification clock runs from the first day of employment. Collect Forms W-4 consistent with the procedure you chose. Federal law also requires new-hire reporting to the state directory within 20 days of hire, sooner in some states.
• Can wait. Handbook, policy rollout, benefit redesign at renewal, org chart changes. None carries a statutory clock starting at closing.

One note on your loan. The SBA revises its operating procedure, and the version that governs your file is the one in force when the loan number issues, not when you signed the letter of intent. Stated as of September 2026: SOP 50 10 8 took effect June 1, 2025, and SOP 50 10 8.1 applies to applications receiving a loan number on or after October 1, 2026. Treat no SBA position as permanent. Ask your lender which version governs your number and confirm it against the SBA’s current version.

Law: 42 U.S.C. 653a; SBA SOP 50 10 8; SBA SOP 50 10 8.1.