Legal Question in Tax Law in Ohio

Re: Business Purchase and Taxes

That�s a good question for a BBS because it is important not only to you but to anyone who is buying (or selling) a business. More generally the issue is the exposure of the new owner to taxes owed by the prior owner (sales, withholding, unemployment, etc.), whereas you have asked specifically about workers� compensation taxes (called �contributions�).

With federal taxes, the answer depends on what you mean by �I bought a business.� Did you buy the stock of an incorporated business? Or did you purchase only assets? Typically the sale of a small business is accomplished through an �asset sale,� and not by buying the entire corporate shell. The problem with buying the shell is that this shell remains liable for all the debts it had prior to your purchase -- the debts are enforceable against the company no matter who owns the stock. And it doesn�t matter whether you knew about the debts or not. So if what you mean is you bought the stock of an incorporated business, the answer is that if it was liable for the contributions before you bought it, it remains liable for those unpaid contributions thereafter.

If, as is more likely, you bought just the assets of a business and not the legal shell, you may still not be off the hook. If a lien was filed before your purchase, that lien would encumber the assets and the state could collect against them. The same thing can happen with federal taxes. If you acquire the assets comprising a business when there is a lien on record, whether or not you were aware of the lien, the assets would be encumbered, and the IRS could follow the assets into your hands. There are �superpriority� provisions in the Internal Revenue Code that protect some purchasers, but they don�t help the bulk purchaser of substantially all of the assets of a going business (see my articles about the federal tax lien in the author�s row section of unclefed.com).

More directly in answer to your question, the Ohio workers� comp. program is administered by the Bureau of Workers� Compensation Insurance, and not by the Ohio Department of Taxation. Usually the workers� comp. laws are administered by departments of labor, or departments of employment security, because these are not really taxes but rather contributions to a state enforced insurance program. Purchasers of existing businesses in Ohio are supposed to transfer of the prior owner�s insurance account under the program, and are instructed to call a special number upon acquiring the business (1-800-OHIOBWC and press 2 for policy transfer options). You should call this number to begin your research about how to arrange coverage for your employees and the extent of your personal liability for any period of time prior to your acquisition of the business. Ohio has a toll-free customer assistance line available from 7:30 a.m. to 5:30 p.m. EST at 1-800-OHIOBWC (1-800-644-6292).