Legal Question in Business Law in California

That is not a simple yes/no question.

First off it depends on the terms of the sale. A buyer may agree to take the debts with the assets and price the purchase accordingly. If there are ongoing leases or financing on inventory or equipment, or employees to be kept on who have accrued vacation or deferred compensation, taking on the debt is usually a good idea to assure it gets paid off without complication. Other times the business is pretty much winding up and the buyer just wants the assets and maybe the name. Then then deal may require the seller to pay off the debts.

The second part is as between the business and the creditors. It takes a few weeks of law school to go over all the circumstances where a creditor can chase the buyer of a business for debts incurred under a previous owner and when they can't, but it does not depend on the deal between the buyer and seller. So a buyer should either take the debt and pay less for the business, or make sure there are solid assurances that the debts will be paid by the seller. Otherwise the buyer may find themselves being chased by the former owners creditors even if the former owner agreed to keep the debts.

The question does not say whether the business is a corporation, LLC, partnership or sole proprietorship. Mr. McCormick's answer seems to address the sale of a proprietorship. If the business is a corporation or LLC and the sale is of the entire business (all the stock or membership interests), and no fraud is involved, the sold entity remains liable for its debts, the seller is in the clear, and the buyer, although not personally liable, will indirectly suffer the financial consequences of the business debt in that they diminish the value of the business he now owns.

Mr. Whipple is mistaken. My answer is identical and correct whether the entity is a proprietorship, a partnership, a limited partnership, a LLC or a corporation. Any of those entities may be sold as a going concern in its entirety, including its debts, or as a sale of assets with the seller(s) remaining liable for the debts. Mr. Whipple describes only one of many ways a business sale can be structured - sale of the outstanding shares. He is right about how that works, but there are a great many more ways to structure a business purchase/sale transaction and who winds up liable for the debts depends entirely on how the deal is structured.