TEXAS BUSINESS LAW
Buying or Selling a Business in Texas: A Legal Guide
Buying or selling a business in Texas comes down to four things: agreeing on price and deal structure, putting the right contracts in place, verifying what you’re actually getting through due diligence, and clearing taxes and licenses so nothing follows the buyer after closing. Get those right and the transaction is straightforward. Miss one — especially the tax-clearance step — and a buyer can inherit debts that have nothing to do with the price they paid.
This guide walks the deal from start to finish. It’s an overview; each stage links to a deeper resource, and at every step the same rule applies: the documents control, so read them and get them right.
Asset Sale vs. Entity Sale: The First Decision
Every business sale is structured one of two ways, and the choice drives everything else.
In an asset sale, the buyer purchases specific assets — equipment, inventory, customer lists, goodwill, contracts — and generally leaves the seller’s legal entity, and most of its liabilities, behind. In an entity sale (a stock or membership-interest purchase), the buyer takes the whole company, assets and liabilities together, including obligations the parties may not know about yet.
Buyers usually prefer asset deals because they can leave unknown liabilities with the seller and often get a stepped-up tax basis in the assets. Sellers often prefer entity sales for cleaner exits and capital-gains treatment. Most small-business sales in Texas are structured as asset purchases. For a fuller comparison, see asset vs. stock purchase.
The Core Documents
A typical Texas business sale runs on a short stack of documents, signed roughly in this order:
| Document | What it does | When |
|---|---|---|
| Confidentiality / NDA | Protects the seller’s financials and trade secrets during talks | Before due diligence |
| Letter of Intent (LOI) | Sets price, structure, and key terms; mostly non-binding | Early, after initial interest |
| Purchase agreement (APA or stock purchase) | The binding contract: price, assets, liabilities, reps and warranties, closing terms | After due diligence |
| Disclosure schedules | Seller’s detailed exhibits backing up its representations | With the purchase agreement |
| Closing documents | Bill of sale, assignments, deeds, resolutions, settlement statement | At closing |
The two that carry the most weight are the confidentiality agreement you sign first and the purchase agreement you sign last. Everything in between is built to make those two accurate.
Due Diligence: Verify Before You Sign
Due diligence is the buyer’s investigation of the business — financial, legal, operational, tax, and more. It is where the real value and the real risks surface, and it should happen before the purchase agreement is final, not after.
At a minimum, a buyer should review three to five years of financial statements and tax returns, all material contracts and leases, litigation history, licenses and permits, employee and benefit obligations, and intellectual property ownership. Sellers shorten this stage by organizing the same records in advance and disclosing problems early — buyers forgive disclosed issues far more readily than ones they discover. See due diligence when buying or selling a business in Texas for the full checklist.
Taxes and the Certificate of No Tax Due
This is the step most overlooked by buyers, and the most dangerous to skip. Under Texas law, a buyer who does not get a Certificate of No Tax Due can be held responsible for the seller’s unpaid state taxes — up to the purchase price of the business.
To clear it, buyer and seller jointly file Form 86-114 (the Joint Request for Certificate of No Tax Due) with the Texas Comptroller. The Comptroller reviews the seller’s account; if anything is owed, it issues a statement of the amount, and the buyer withholds that sum from the purchase price at closing. If the seller refuses to sign the joint request, the Comptroller will not issue the certificate — which is itself a red flag worth pausing on.
Separately, the business’s Texas franchise (margin) tax should be current, and the buyer needs to plan for going-forward filings. See how to calculate Texas franchise taxes for how that tax works.
Licenses, Permits, and Non-Competes
Operating licenses and permits do not always transfer automatically — many must be reissued or reapplied for in the new owner’s name, so confirm the path for each one before closing rather than after. Leases and key contracts often require the landlord’s or counterparty’s consent to assign; build those consents into the closing conditions.
A non-compete from the seller is standard and, in the sale context, enforceable in Texas. Under Texas Business and Commerce Code Section 15.50, a covenant not to compete is enforceable if it’s tied to an otherwise enforceable agreement (the sale qualifies) and is reasonable in time, geographic area, and scope. Texas courts give sale-of-business non-competes more room than employment non-competes, because the buyer is paying for goodwill the seller could otherwise walk across the street and rebuild. (The federal noncompete ban the FTC issued in 2024 was struck down in court and formally removed in 2026, so state law governs.)
Closing and Transition
At closing, the parties exchange signed documents and funds, and control of the business changes hands. A short, written transition plan — covering the seller’s involvement for a defined period, employee communication, and handoff of vendor and customer relationships — protects the value the buyer just paid for. Whether you’re buying or selling, walking the buyer’s checklist and seller’s checklist keeps the final steps from slipping.
Frequently Asked Questions
Should I buy the assets or the whole company?
Most buyers prefer an asset purchase because it leaves unknown liabilities with the seller and can provide a better tax basis. Sellers often prefer selling the entity for a cleaner exit. The right answer depends on the specific liabilities, tax positions, and contracts involved — decide it before drafting the purchase agreement.
Can I be stuck with the seller’s debts after I buy a business in Texas?
You can, for unpaid state taxes, if you don’t get a Certificate of No Tax Due from the Texas Comptroller. Buyer and seller file Form 86-114 jointly; the buyer then withholds any amount the Comptroller says is owed. In an asset deal, most other liabilities stay with the seller, but only if the purchase agreement is drafted to keep them there.
How long does it take to buy or sell a business in Texas?
A straightforward small-business sale commonly takes two to four months from letter of intent to closing — longer if financing, landlord consents, or regulated licenses are involved. Thorough due diligence is usually the longest stage.
Do I need an attorney to sell my business?
Texas doesn’t require one, but the purchase agreement, disclosure schedules, and tax-clearance steps are where deals go wrong. An attorney drafts those documents to match the deal you actually agreed to and keeps liabilities on the correct side of the table.
Buying or selling a Texas business is a series of documents that either protect you or expose you. Reidel Law Firm handles Texas business sales and purchases on a flat fee — purchase agreement, due diligence support, and tax-clearance steps, with direct attorney access. Get flat-fee help with your Texas business sale →
