Four exceptions move the seller’s liabilities to you.

Buying assets does not buy the seller’s debts. That is the default rule, and it holds in most deals. Four exceptions move liabilities to you anyway: assumption, de facto merger, mere continuation, and a sale made to escape creditors. Separately, tax, environmental, and pension statutes reach the buyer no matter what the purchase agreement says.

Does an asset purchase leave the seller’s debts behind?

An asset purchase leaves the seller’s debts with the seller. The buyer takes the listed assets, and only the liabilities it agrees in writing to take. Delaware states that rule narrowly: absent unusual circumstances, a successor is liable only for the liabilities it expressly assumes. Four judge-made exceptions cut into it.

The four are assumption of liability, a de facto merger or consolidation, continuation of the seller under a different name, and fraud. That is the common-law list in Delaware, not an open-ended balancing test. A claimant who cannot plead one of the four has no common-law successor claim. Statutory routes stay open regardless. Other states phrase the exceptions differently, and some are broader.

Law: Magnolia’s at Bethany, LLC v. Artesian Consulting Engineers, Inc., 2011 WL 4826106 (Del. Super. Sept. 19, 2011); Fountain v. Colonial Chevrolet Co., 1988 WL 40019 (Del. Super. Apr. 13, 1988).

A creditor never signed your purchase agreement and is not bound by its choice-of-law clause.

When has a buyer assumed a liability, expressly or by implication?

Assumption is the exception buyers create themselves. A buyer assumes a liability when the asset purchase agreement says so, and a court can also find assumption in conduct that treats the seller’s obligation as the buyer’s own. The elements are short: an obligation of the seller, plus words or acts by the buyer accepting it.

Express assumption lives in the assumption section and the schedule it points to. Everything on the schedule is yours. Language assuming “all liabilities arising out of the business” hands over the unknown claims the rest of the document was built to exclude.

Implied assumption comes from behavior after closing. Paying the seller’s old invoices. Settling a pre-closing claim. Honoring a warranty the seller wrote. No single act decides it. Each is evidence of intent, and a pattern is what a court weighs.

I read the assumption schedule before the indemnity, because the schedule is where liabilities actually move. Then I read the bill of sale and the assignment and assumption agreement, to see whether either is broader.

What is a de facto merger under Delaware law?

A de facto merger is a purchase that functions as a merger without the paperwork of one. Delaware applies the theory restrictively. Courts look for continuity of ownership, the seller ceasing ordinary business and dissolving quickly, the buyer assuming obligations needed to run the business without interruption, and continuity of management, employees, location, and operations.

Continuity of ownership carries the most weight in Delaware. The owners of the seller become owners of the buyer, usually because the price was paid in the buyer’s stock or units. Pay cash, and the claimant is missing the fact the Delaware theory is built on. Not every state weighs it that heavily.

Law: Magnolia’s at Bethany, 2011 WL 4826106; Spring Real Estate, LLC v. Echo/RT Holdings, LLC, 2013 WL 6916277 (Del. Ch. Dec. 31, 2013).

Pay cash. Equity issued to the seller’s owners is the fact a de facto merger claim needs most.

What makes a buyer a mere continuation of the seller?

Mere continuation asks whether the buyer is the same legal entity as the seller wearing a new name. It is not about continuing the same business. Delaware requires continuation of the same legal entity, looking to common identity of officers, directors, or stockholders, and to whether only one entity exists once the transfer is complete.

Apply it to a normal deal. You buy through a new limited liability company you own, and the seller entity stays alive, still owned by the seller. Two entities, different owners, and the Delaware exception does not fit.

Now break it. The seller dissolves at closing, its owner takes units in your buying entity, and one person signs for both sides. That is common identity plus one surviving entity, and the exception is pleaded.

Can creditors reach a sale made to escape liability?

Fraud is the fourth exception, and it targets the transfer rather than the buyer’s conduct. A creditor argues the sale was arranged to put assets beyond reach. The common-law exception turns on actual intent to hinder creditors. The state fraudulent transfer statute is a separate route, and it does not require proof of intent.

Under those statutes a creditor can attack a transfer made to hinder, delay, or defraud, or one made for less than reasonably equivalent value by an insolvent seller. The remedies are equitable and discretionary, not automatic, and the look-back period runs from the transfer and varies by state.

Price and process are the defense. Arm’s-length negotiation, an independent valuation, payoff letters, and lien searches cut against intent and support reasonably equivalent value. Keep the valuation your lender orders. The claim that gets traction: a seller facing a judgment sells to a relative’s entity and distributes the proceeds that week.

Law: Delaware Uniform Fraudulent Transfer Act, 6 Del. C. sections 1304 and 1305; other states have adopted the uniform act with variations.

Which exception is the real risk in my deal?

Risk ranking depends on structure, not on how sympathetic a claim sounds. Assumption is the exception you sign up for, in language you can read before closing. De facto merger and mere continuation are structural, and both turn on facts you control at closing. Fraud and fraudulent transfer claims follow a distressed seller.

Two further theories, continuity of enterprise and product line succession, are minority rules in a handful of states, mostly in injury cases against manufacturers. Neither is the Delaware position: a federal court applying Delaware law found no Delaware decision adopting a successor duty to warn. Buying a manufacturer, ask which theories the relevant states recognize.

Law: Elmer v. Tenneco Resins, Inc., 698 F. Supp. 535 (D. Del. 1988).

Which liabilities follow the assets no matter what the purchase agreement says?

Statutory successor liability ignores private contracts. Four categories reach an asset buyer directly: state sales and use tax successor liability, environmental liability as an owner or operator, multiemployer pension withdrawal liability, and state wage and unemployment successor rules. The indemnity does not stop these claims. It gives you someone to chase afterward.

• State sales and use tax. Many states make the buyer liable for the seller’s unpaid sales and use tax, often capped at the price or asset value. Several add a notice and withholding procedure: notify the agency before closing, hold back part of the price, release on clearance.
• Environmental. Under CERCLA, the current owner or operator of a contaminated facility is liable for cleanup regardless of fault. Owning the land is one trigger, operating the site another, so a lease does not solve it. Bona fide prospective purchaser status requires all appropriate inquiries before you acquire, plus continuing obligations afterward.
• Multiemployer pension withdrawal liability. If the seller contributes to a union multiemployer plan, ceasing contributions can trigger withdrawal liability. The ERISA sale-of-assets exception is the seller’s, and it is conditional: the buyer must take substantially the same contribution obligation and post a bond or escrow. Federal courts have separately imposed withdrawal liability on a buyer with notice that kept the operations running.
• Wage and unemployment. Several states impose successor liability for unpaid wage judgments, and unemployment experience rating can transfer with an acquired trade or business, changing your rate. Transfer is mandatory in some circumstances, elective in others. Have your accountant confirm.

Law: 42 U.S.C. 9607(a), 9601(40), 9607(r), 9601(35)(B); 29 U.S.C. 1381, 1384; state tax and labor statutes vary.

How do I structure the deal so the exceptions do not fit?

Structure removes facts that three of the four exceptions require, and the buyer controls most of it without the seller’s cooperation. The design points below are available at signing and unbuyable afterward. They work by removing what a claimant must plead, not by adding language nobody outside the deal is bound by.

• Buy through a purpose-formed entity. Form a new entity for this acquisition, with no history and no other business inside it. SBA-guaranteed loans generally require personal guaranties from owners at or above a stated threshold, set by the operating procedure in force when your loan number issues, so expect to sign one. The entity separates the business’s liabilities, not your guaranty.
• Keep the seller entity alive. Covenant that it stays in existence, in good standing, and funded to a stated amount, for a period tied to indemnity survival. Sellers push back; ask early.
• Pay cash, not your equity. Units or stock in your buying entity supplies the continuity of ownership a de facto merger claim needs.
• Assume liabilities by schedule only. Named contracts and post-closing obligations. Refuse a blanket assumption of all liabilities of the business.
• Change the governance and the paper. Do not install the seller’s officers in the same seats. New employer identification number, bank accounts, insurance, and contracts in the new entity’s name. Tell customers and vendors a new company acquired the assets. If the seller stays on, use a transition services agreement, and confirm with your lender what post-closing role the SBA rules then in force permit.

If none of this binds a creditor, what actually protects me?

None of this binds a third-party claimant. A creditor of the seller never signed the asset purchase agreement and is not bound by how it allocates liabilities. Structure only decides whether that claimant can plead an exception. If a claim lands anyway, the buyer’s real protection is recourse against a solvent counterparty, and three provisions create it.

• The indemnity. The seller’s promise to pay you for pre-closing liabilities. It is worth what the indemnitor is worth. Ask the individual owners to sign personally; expect to negotiate.
• The escrow or holdback. Money that does not reach the seller at closing, held against claims for a defined period. It does not depend on the seller having money later. Sellers at this size resist escrows and counter with less, for less time. Representation and warranty insurance is a larger-deal product; skip it here.
• The set-off right against the seller note. If part of the price is a seller note, the agreement should let you offset indemnity claims against payments due. Where the note is on standby for SBA purposes, the standby agreement controls what can be withheld. Confirm both with your lender.

Here is the part that cuts against you. Recourse is worth nothing once the seller dissolves and distributes the proceeds.

An indemnity from a dissolved entity that has already distributed the proceeds is a sentence, not a remedy.

What should I do before closing?

Successor liability diligence is a search-and-schedule exercise, done before the loan documents are drafted. The searches are quick and the answers are mostly binary. Work the list with your counsel and accountant, and bring the results to your lender. Some answers change the structure, not the price.

• Confirm which state’s law applies, and which of these theories it recognizes.
• Run UCC lien, judgment, tax lien, and litigation searches in the seller’s state of organization and wherever it operated. Get a good standing certificate.
• Ask whether the state has a tax clearance or bulk sale notice procedure. Most states repealed UCC Article 6, but tax notice rules survive in many. That deadline runs backward from closing, so calendar it before you set the date.
• Ask in writing whether any collective bargaining agreement or multiemployer plan exists.
• If real property is bought or leased, confirm with your lender what environmental investigation the SBA procedure in force requires, and complete it before you acquire.
• Read the assumption schedule, the bill of sale, and the assignment and assumption agreement together, and strike anything broader than the schedule.
• Negotiate the holdback, survival period, and set-off right as one package.

One note on currency. Stated as of September 2026: the operating procedure in force is SOP 50 10 8, effective June 1, 2025 and revised since, and the SBA has issued SOP 50 10 8.1 for loans numbered on or after October 1, 2026. Your lender applies the version in force when your loan number issues, not the one in force when you sign. Confirm it with your lender.

Program: SBA SOP 50 10 8 (effective June 1, 2025); SOP 50 10 8.1 (loans numbered on or after October 1, 2026). Stated as of September 2026.