Herman Melville once wrote: “All my means are sane, my motive and my object mad.” The object of my obsession, and that of many practitioners who deal with the purchase and sale of small businesses in Connecticut, is having a smooth, seamless, efficient and timely closing of the sale. What can often seem to be the “great white whale” in this process: appropriately addressing successor liability with the Department of Revenue Services.
The buyer of a business in Connecticut must be vigilant of potential successor liability, or tax consequences that the buyer could inherit from the seller of the business under C.G.S. §12-424. To address this potential liability, the buyer or buyer’s representative must apply to the DRS for a tax clearance certificate. But the DRS cannot issue such a certificate until after the final tax return is filed, which by definition occurs after the closing.
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