TEXAS BUSINESS LAW
Buying a Business in Texas: A Step-by-Step Guide
Buying a business in Texas follows a defined path: sign a non-disclosure agreement, agree on a letter of intent, run due diligence, negotiate and sign a purchase agreement, clear the seller’s tax debts with the Texas Comptroller, obtain the consents the deal needs, and close. Each step exists to answer one question before you wire the money — what exactly am I buying, what comes attached to it, and what protects me if the seller was wrong?
This guide walks the acquisition in order, flags the Texas-specific traps that catch out-of-state buyers, and shows where a transaction attorney earns their fee.
The Stages of a Texas Business Purchase
Most deals move through the same sequence. Knowing the order keeps you from negotiating price before you understand what you are pricing.
| Stage | What happens | Why it matters |
|---|---|---|
| NDA | Seller shares financials after you sign a confidentiality agreement | Protects the seller; lets you see real numbers |
| Letter of intent (LOI) | Non-binding outline of price, structure, and timeline | Frames the deal before lawyers draft |
| Due diligence | You investigate the finances, legal standing, and operations | Confirms value and surfaces hidden liabilities |
| Purchase agreement | Binding contract: price, assets, liabilities, warranties | The document that governs everything after signing |
| Approvals & consents | Board/shareholder votes, landlord and contract consents | Keeps key contracts and the lease in place |
| Tax clearance | Comptroller’s Certificate of No Tax Due requested before closing | Shields you from the seller’s unpaid state taxes |
| Closing | Sign documents, transfer funds, hand over the business | Ownership legally changes hands |
Asset Purchase vs. Stock Purchase
The first structural decision is whether you buy the company’s assets or its ownership interests (stock or membership units). The choice drives your liability exposure and tax treatment.
In an asset purchase, you buy specific items — equipment, inventory, customer lists, trademarks, goodwill — and generally leave the seller’s liabilities behind unless you expressly assume them. Buyers usually prefer this structure because it limits exposure to unknown debts and lets you step up the tax basis of what you acquire.
In a stock (or membership-interest) purchase, you buy the entity itself, and it comes with everything: contracts, licenses, and liabilities, known and unknown. This can be simpler when the business holds permits, leases, or contracts that are hard to reassign, but it raises the stakes on due diligence because you inherit the company’s full history.
Texas has no state income tax, so the federal tax consequences of the structure usually dominate the analysis. Model both before you commit.
Due Diligence: What You Are Really Checking
Due diligence is the investigation that confirms the business is worth what you are paying and that you are not buying someone else’s problems. It splits into three core reviews:
Financial. Examine three to five years of profit-and-loss statements, balance sheets, and tax returns; verify revenue is real and recurring; identify secured debts that travel with the assets. The goal is to confirm the earnings the seller is selling you actually exist.
Legal. Confirm the entity is in good standing with the Texas Secretary of State, verify the seller has authority to sell, check that licenses and permits are current and transferable, and search for pending litigation, liens, and judgments.
Operational. Review key contracts, the lease, employee and contractor arrangements, supplier terms, and the customer base. Look for change-of-control clauses that let a landlord or major customer walk when ownership changes.
For a deeper walkthrough, see our guide on the types of due diligence for a Texas business sale.
The Texas Tax-Clearance Trap
This is the step out-of-state buyers miss most often. Under Texas Tax Code Section 111.020, when you buy a business or its inventory, you can become personally liable for the seller’s unpaid state taxes — sales, franchise, and others — up to the purchase price, unless you withhold enough of the price to cover them until the seller produces proof the taxes are paid.
The protection is a Certificate of No Tax Due from the Texas Comptroller. The buyer and seller file a joint request (Comptroller Form 86-114), and the Comptroller either confirms nothing is owed or states the amount that must be paid first. Two rules make or break this safeguard:
- Request it before closing. A certificate obtained after the sale does not absolve you.
- Build in time. If no audit is needed, the certificate usually issues within about 10 business days; if the Comptroller audits the seller’s records, it can take up to 90 days.
Non-Compete and Transition Protection
A seller who pockets your money and reopens across the street can destroy the goodwill you just paid for. Texas enforces a covenant not to compete that is ancillary to the sale of a business under Business and Commerce Code Section 15.50, provided it is reasonable in duration, geographic area, and scope of activity. Covenants tied to a business sale are generally given more latitude than ordinary employee non-competes because the buyer is protecting purchased goodwill.
One note on the federal picture: the FTC’s 2024 rule that would have banned most non-competes was struck down in court, the agency withdrew its appeals in 2025, and as of 2026 the FTC has shifted to case-by-case enforcement. Non-compete enforceability is again governed by state law — in Texas, the standard above.
Pair the covenant with a written transition plan that defines how long the seller stays on, who they train, and when they hand off customer and vendor relationships.
Closing the Deal
At closing, the parties sign the operative documents and exchange value. Typical closing documents include the bill of sale, assignment and assumption agreements, the non-compete, lease assignments, and any required third-party consents. Funds usually move by wire or cashier’s check on the agreed date.
Before you sign, confirm every closing condition in the purchase agreement is satisfied: tax clearance in hand, consents obtained, financing funded, and the disclosure schedules accurate. After closing, your focus shifts to integration — transferring permits and accounts, retaining key employees, and folding the business into your operations. See our overview of closing a business in Texas for the wind-down mechanics on the other side of a sale.
Frequently Asked Questions
Should I buy the assets or the company itself?
Most buyers prefer an asset purchase because it leaves the seller’s unknown liabilities behind and improves the tax basis of what you acquire. A stock or membership-interest purchase makes sense when valuable contracts, permits, or leases are difficult to reassign. Model the tax and liability outcome of each before deciding.
Can I be liable for the seller’s unpaid taxes?
Yes. Under Texas Tax Code Section 111.020, a buyer can inherit the seller’s unpaid state taxes up to the purchase price. Request a Certificate of No Tax Due from the Comptroller (Form 86-114) before closing to protect yourself.
Do I need a lawyer to buy a business in Texas?
Texas does not require one, but the purchase agreement, tax clearance, consents, and non-compete are where deals go wrong. An attorney drafts and negotiates these so your money is protected if the seller’s representations prove false.
How long does a typical purchase take?
Smaller deals often close in 60 to 90 days. The variable is usually due diligence and, if the Comptroller audits the seller, the up-to-90-day wait for tax clearance.
Buying or selling a Texas business? Reidel Law Firm handles purchase agreements, due diligence, and closing on a flat fee, with direct attorney access from first call to closing — see how the business sale package works.
