Selling a business in Texas means running three tracks at once: negotiating the deal with your buyer, clearing your accounts with the state, and reporting the transaction to the IRS. Some deadlines are as short as 10 days after closing, and one common misstep — skipping the Comptroller’s tax clearance — can leave a buyer personally liable for your unpaid state taxes and leave you fighting over escrow. Here is how to sell a business in Texas in the order the filings actually need to happen.
Get Your Records in Order Before You List
Serious buyers open with the numbers. Pull at least three years of profit-and-loss statements, balance sheets, and federal income tax returns, and arrange them chronologically so a buyer can trace revenue and expense patterns without reconstructing them from scratch.
Then build out the operational side. Inventory your physical assets — equipment, vehicles, furniture, machinery — with current depreciated values. Document intellectual property (trademarks, patents, software licenses) with proof of clear title and transferability. Read every commercial lease for assignment or subletting restrictions, because a lease that cannot be transferred can kill an otherwise good deal. A secure digital data room with all of this in one place makes due diligence faster and tells the buyer you run a tight operation.
Setting an Asking Price
Most small-to-mid-market sales price off a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization). You multiply EBITDA by an industry-specific multiple. As of January 2026, public-company data shows multiples ranging from roughly 6x in industries like advertising to over 13x in software. Private businesses generally trade at lower multiples because of their size, liquidity, and risk.
A formal appraisal from a certified business valuator runs anywhere from a few hundred dollars to $50,000 or more depending on complexity. Smaller deals often skip the formal appraisal and rely on a broker or accountant for a defensible number. The valuation is only as strong as the records behind it. Buyers discount for messy books, revenue concentrated in one customer, or an owner so central to daily operations that the business struggles without them.
The Purchase Agreement and What Has to Be in It
Most deals start with a non-disclosure agreement so you can share financials without worrying about leaks, followed by a letter of intent setting price, deal structure, an exclusivity period, and the major conditions to closing.
The transaction itself lives in the purchase agreement. In an asset purchase, the buyer selects specific assets and liabilities, and the contract states exactly what is included and what stays behind. In a stock purchase, the buyer takes the entity whole, including every obligation attached to it. Either structure needs the purchase price allocated among tangible assets, intangible assets, and goodwill, because that allocation drives how both sides report the sale for tax purposes.
Indemnification and escrow are where deals get tense. A holdback of around 10% of the purchase price, held in escrow for 12 to 18 months, is common in asset deals and covers the buyer if undisclosed liabilities surface after closing. Sellers push for smaller and shorter; buyers push the other way. If you want the buyer to sign a non-compete, make sure the purchase agreement explicitly allocates part of the price to goodwill. Texas courts are more willing to enforce a non-compete tied to a business sale than one tied to employment, but only when the buyer actually purchased the seller’s goodwill rather than just hard assets.
Tax Clearance From the Texas Comptroller
This is the step that catches more sellers and buyers off guard than any other. Under Texas Tax Code § 111.020, the buyer must withhold enough of the purchase price to cover any unpaid state taxes until the seller produces either a receipt from the Comptroller showing everything is paid or a certificate stating no taxes are due.1State of Texas. Texas Tax Code Chapter 111 – Collection Procedures A buyer who skips this becomes personally liable for the outstanding amount, up to the full value of the purchase price.
To get the certificate, file Form 05-359 (Request for Certificate of Account Status) with the Texas Comptroller of Public Accounts. The form asks for the entity’s legal name, taxpayer number, and Secretary of State file number.2Texas Comptroller of Public Accounts. Form 05-359, Request for Certificate of Account Status If you are terminating the entity, all annual and final franchise tax reports must be filed or attached.
The Comptroller must issue the certificate, or a statement of taxes owed, within 60 days of receiving the request or within 60 days of gaining access to the seller’s records for audit, whichever is later. The outside deadline is 90 days. If the Comptroller misses that window, the buyer is released from the withholding obligation.1State of Texas. Texas Tax Code Chapter 111 – Collection Procedures Because of that timeline, request the certificate early. It routinely becomes the item that holds up closing.
What to File With the Secretary of State
What you file depends on whether the entity keeps operating under new ownership or shuts down.
If the entity is being dissolved, file Form 651 (Certificate of Termination). You will need the entity’s name, its Secretary of State file number, and a statement that the governing persons authorized winding up under the Texas Business Organizations Code.3Texas Secretary of State. Form 651 Certificate of Termination of a Domestic Entity The filing fee is $40 for a for-profit corporation.4State of Texas. Texas Business Organizations Code Section 4.152 – Filing Fees: For-Profit Corporations
If the entity will continue under the buyer, file Form 401 to update the registered agent and office address. The form lists the current agent, the new office information, and requires an authorized officer’s signature.5Office of the Texas Secretary of State. Form 401 – Instructions for Change of Registered Agent/Office The fee is $15.4State of Texas. Texas Business Organizations Code Section 4.152 – Filing Fees: For-Profit Corporations
Once the filing is approved, share the stamped acknowledgment or certificate of filing with the buyer and any escrow agent, since it often ties into release of escrowed funds.
Closing Out State Agency Accounts
Texas Workforce Commission — 10 Days
Notify the Texas Workforce Commission of the sale or closure within 10 days. The TWC uses this to decide whether the buyer inherits your unemployment tax experience rating.6Texas Workforce Commission. Tax Forms and Instructions Miss it and you can remain on the hook for unemployment tax contributions and penalties on wages you are no longer paying.
Sales Tax Permit
If you hold a Texas sales tax permit, file a final sales tax return through the sale date, mark it as your final return, and request cancellation of the permit. A sales tax permit does not transfer, so the buyer must apply for their own.7Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions Until your permit is formally canceled, the Comptroller can keep assessing sales tax obligations against it.
Final Franchise Tax Report — 60 Days
Any entity ceasing to do business in Texas must file a final franchise tax report within 60 days of the date it stopped operating. For a Texas entity being terminated, the end date is the effective date of termination on the Secretary of State’s records. The accounting period for the final report runs from the day after the end date on your most recent franchise tax report through the termination date.8Texas Comptroller of Public Accounts. Final Report Instructions Miss the 60-day window and late penalties and interest accrue on an account you thought was closed.
Federal Reporting: IRS Form 8594
In an asset sale, both buyer and seller file IRS Form 8594 (Asset Acquisition Statement Under Section 1060) with their federal income tax returns for the year of the sale.9Internal Revenue Service. Instructions for Form 8594 The form reports how the purchase price was allocated across asset classes ranging from cash through equipment, intangibles, and goodwill. Both parties must agree on the allocation in the purchase agreement, and the numbers reported on each Form 8594 must match. If they diverge, expect an IRS inquiry.
The allocation matters because it drives the seller’s gain or loss on each category and the buyer’s tax basis going forward. Goodwill is amortized by the buyer over 15 years; equipment can be depreciated much faster. On the seller’s side, long-term capital gains on assets held more than a year are taxed at federal rates of 0%, 15%, or 20% depending on income, while gains on inventory or short-term assets are taxed as ordinary income. If the allocation is later revised, both parties must file an amended Form 8594.9Internal Revenue Service. Instructions for Form 8594
Employee Notice: When WARN Applies
If your business employs 100 or more full-time workers, the federal Worker Adjustment and Retraining Notification Act may apply. WARN requires at least 60 calendar days’ advance written notice before a plant closing or mass layoff.10eCFR. Part 639 Worker Adjustment and Retraining Notification A plant closing triggers notice when the shutdown causes job losses for 50 or more employees at a single site within a 30-day period. A mass layoff triggers notice when at least 50 employees are affected and represent at least 33% of the active workforce at that site, or when 500 or more employees are affected regardless of percentage.
In a sale, the seller is responsible for WARN notice for any closing or layoff up to and including the effective date of the sale; after that, the obligation shifts to the buyer.10eCFR. Part 639 Worker Adjustment and Retraining Notification Address this explicitly in the purchase agreement. If neither party sends the required notice, both can face liability for up to 60 days of back pay and benefits per affected worker. If you fall below the 100-employee threshold, WARN does not apply, though the purchase agreement can still allocate any employee-notice obligations you want to negotiate.
Getting the Order Right
Timing is the difference between a clean exit and one that follows you around. Request the Comptroller’s tax clearance certificate early, before you are deep in negotiations, because the 60-to-90-day response window can stall closing. Entity filings with the Secretary of State happen at or shortly after closing. TWC notification and sales tax permit cancellation come within days of the effective date. The final franchise tax report is due within 60 days of the termination date. Form 8594 goes with each party’s annual federal return.
Sellers who treat these filings as afterthoughts often find months later that they are still accruing obligations on a business they no longer own. Request the Comptroller’s certificate early, get the purchase agreement’s price allocation right the first time, and calendar every post-closing deadline the day the deal signs.