Selling a Business in Texas
Legal requirements and tips for business owners selling without a broker in Texas.
Non-Compete Enforceability
Courts apply a reasonableness test: the non-compete must be reasonable in geographic scope, duration, and activity restricted. Courts may revise unreasonable terms. Texas Comptroller Form AP-227 required for tax clearance. Texas Business Opportunity Act requires registration and disclosure. Non-competes enforceable if ancillary to an otherwise enforceable agreement and reasonable. Texas also requires a formal business opportunity disclosure before any sale agreement or payment changes hands — see below. Texas does not require bulk sale creditor notification, though using an escrow agent is still good practice to protect the buyer from undisclosed debts.
How a Business Sale Actually Closes
Most small business sales without a broker follow the same shape: a signed letter of intent, buyer due diligence on your financials and contracts (typically 2–6 weeks), a definitive asset purchase agreement, and a closing where funds move through escrow as licenses, leases, and vendor contracts get reassigned. Structure the deal as an asset sale rather than a stock sale in most cases — it lets the buyer avoid inheriting unknown liabilities and is usually the standard buyers expect. Get a tax clearance certificate before closing so you aren't personally liable for the business's unpaid taxes after the sale, and don't release any funds until every license, lease assignment, and UCC lien release is actually in hand — verbal assurances from a buyer's attorney are not the same as a signed document.
Business Opportunity Disclosure Law
Texas has a Business Opportunity or Franchise Disclosure law. Before signing any sale agreement or collecting any money from a buyer, you must provide a formal disclosure document covering:
- Seller's background and financial condition
- Business description and required investment
- Earnings claims (if any) with substantiation
- Any pending litigation or prior bankruptcies
Failure to comply can void the sale and expose you to civil and criminal liability. Consult an attorney familiar with Texas business opportunity law.
Tips for Selling in Texas
- Get a tax clearance certificate from the Texas Department of Revenue before closing.
- Have an attorney review your Asset Purchase Agreement under Texas law.
- Check that all business licenses are transferable or that new licenses can be obtained.
- If you have employees, review Texas WARN Act obligations (applies if 50+ employees).