The type of sale and structure of the sales agreement will determine the answer. If you enter into a stock sale – the buyer is purchasing the business entity and all that comes with it – including liabilities. The corporation operates under the same Federal ID number and lives on into the future.
Banks and liens get paid first if you enter into an asset sale. Next could be personal notes or notes payables to the shareholder. After all the debts are paid, the remainder goes to the equity owners based on their ownership percentage.
**Important note – as the business seller, make sure to get all personal guarantees back in an asset sale.
**Important note – a genuine concern for owners who plan to sell in 2023 and beyond – CAPITAL GAINS – be creative to get the most after-tax benefit and, most importantly, get advice from an expert.