Purchasing a company, paying unemployment

[mitchelt]

What is the name of your state (only U.S. law)? Colorado

FYI: I am going to use fictitious names.

I work for my father in-law at his company: Acme Paper Products.
We are going to purchase his business and change names to: Acme Paper Solutions

There are certain people we don't want in the new company...if we do not offer them a position in the new company, do we have to pay unemployment?

 

[cbg]

Of course. Why on earth would you think otherwise?

 

[LdiJ]

What is the name of your state (only U.S. law)? Colorado

FYI: I am going to use fictitious names.

I work for my father in-law at his company: Acme Paper Products.
We are going to purchase his business and change names to: Acme Paper Solutions

There are certain people we don't want in the new company...if we do not offer them a position in the new company, do we have to pay unemployment?

It depends on how the company is structured. If a brand new company is buying only the assets of the old company, then you wouldn't be laying off any employees, you simply would not be hiring them...it would also be up to the old company to lay them off.

If individuals are buying the old company and simply changing its name, then the new owners would be laying them off.

 

[Zigner]

Of course. Why on earth would you think otherwise?

It depends on how the entities are structured and how the purchase is structured. If the new entity is merely purchasing the assets of the other entity, then they wouldn't necessarily take on the liabilities (including employment-related liabilities).

 

[cbg]

But either way, they're going to be eligible for unemployment.

I read it initially that the father in law already owns the company and the poster is buying in. If that is the case, then either way the father in law (though perhaps not the poster) is going to have his account charged for the benefits. If I read it incorrectly and it's that the father in law and the poster are, in partnership, buying the company from a third party, that's different and in that case, I would agree with Zig.

 

[Zigner]

... I would agree with Zig.

To be fair, LdiJ beat me to it

 

[mitchelt]

It depends on how the company is structured. If a brand new company is buying only the assets of the old company, then you wouldn't be laying off any employees, you simply would not be hiring them...it would also be up to the old company to lay them off.

If individuals are buying the old company and simply changing its name, then the new owners would be laying them off.

Thank you (and everyone else) for the information.

We would be changing the name for liability reasons only, my father in-law would actually become an employee so he would still be around.

I just hate the fact of having to pay unemployment for less than stellar employees that have just skated along for years.

 

[LdiJ]

Thank you (and everyone else) for the information.

We would be changing the name for liability reasons only, my father in-law would actually become an employee so he would still be around.

I just hate the fact of having to pay unemployment for less than stellar employees that have just skated along for years.

You still are not making it clear just exactly how the sale is going to be structured. However, the bottom line is this:

Either the laid off employees will be eligible for unemployment off of the experience account of your father in law (under that EIN) if his business just stops, OR the laid off employees will be eligible for unemployment off of that same experience account if you simple take over your father in law's business.

So, one way or another, they are going to be eligible for unemployment. However, it won't go against the experience account of any new business entity that is formed, unless that entity fully takes over both the assets and the liabilities of the old entity.

 

[mitchelt]

You still are not making it clear just exactly how the sale is going to be structured. However, the bottom line is this:

Either the laid off employees will be eligible for unemployment off of the experience account of your father in law (under that EIN) if his business just stops, OR the laid off employees will be eligible for unemployment off of that same experience account if you simple take over your father in law's business.

So, one way or another, they are going to be eligible for unemployment. However, it won't go against the experience account of any new business entity that is formed, unless that entity fully takes over both the assets and the liabilities of the old entity.

Makes sense...thank you for the information!

 

[Zigner]

Thank you (and everyone else) for the information.

We would be changing the name for liability reasons only, my father in-law would actually become an employee so he would still be around.

I just hate the fact of having to pay unemployment for less than stellar employees that have just skated along for years.

It's clear to me that you (plural) are simply trying screw someone. (spit)

 

[commentator]

In most states, it will be very much related to the old company's experience rating. This has been thought of and tried for many years, in every state. It is called "dumping" or SUTA dumping. Businesses are sold and change hands or reorganize all the time. How lovely it would be if you could restructure your business, close the old one and end up with a bright shiny new employer account without the high experience rating your old business has accumulated. Doesn't happen. Employers who buy a business or reorganize a business and lay off all the old business' employees will usually find themselves not with a clean slate and a low experience rating, but with the experience rating of the former business. In most cases, you buy this along with the rest of the purchase, or carry it on through the reorganization. If you want accurate details related to how your particular state deals with this issue, I suggest you call the unemployment tax unit of your state's Department of Labor (the same ones you submit your wage records to quarterly.) They'll be able to tell you just how it works in your state.

But you're using the new business, the buy out, whatever you want to call it, as a time to clean house. That's as good as it gets. You're not able to "punish" these marginal employees you want to get rid of any more than by letting them go through no fault of their own.

If you try to terminate them for cause, bringing up "performance issues" or any such manufactured excuses for why the old company's account should not be charged related to their being let go, it will be dismissed and they'll be approved quickly. The business has kept them on for an extended period, and suddenly decided their performance was not up to snuff, just as they were being sold or restructured. So you're not going to be able to show a clear valid trail of disciplinary measures for their supposed poor performance or a pattern of job related misconduct, and they'll be approved to draw benefits anyway.

If you have a poorly performing employee, discover that you have made a "hiring mistake," it's good to get rid of them quickly. This way, though you will have only a tiny liability for unemployment, or perhaps none, if you move quickly enough, you'll have a clear cut performance issue/tardiness/attendance/insubordination problem. They may get to draw anyway, but it won't hurt your bottom line much if at all. If you allow marginal employees to languish in your company for years, not dealing with the problems proactively, then you'll end up with probably not enough of any one issue to terminate for without having to pay unemployment benefits, all of which will be charged against your account. If they were good enough to keep for five or six years, it's then much more difficult to come in and try to show a misconduct reason for termination related to "they weren't doing a good job" or anything else.

 

[LdiJ]

In most states, it will be very much related to the old company's experience rating. This has been thought of and tried for many years, in every state. It is called "dumping" or SUTA dumping. Businesses are sold and change hands or reorganize all the time. How lovely it would be if you could restructure your business, close the old one and end up with a bright shiny new employer account without the high experience rating your old business has accumulated. Doesn't happen. Employers who buy a business or reorganize a business and lay off all the old business' employees will usually find themselves not with a clean slate and a low experience rating, but with the experience rating of the former business. In most cases, you buy this along with the rest of the purchase, or carry it on through the reorganization. If you want accurate details related to how your particular state deals with this issue, I suggest you call the unemployment tax unit of your state's Department of Labor (the same ones you submit your wage records to quarterly.) They'll be able to tell you just how it works in your state.

But you're using the new business, the buy out, whatever you want to call it, as a time to clean house. That's as good as it gets. You're not able to "punish" these marginal employees you want to get rid of any more than by letting them go through no fault of their own.

If you try to terminate them for cause, bringing up "performance issues" or any such manufactured excuses for why the old company's account should not be charged related to their being let go, it will be dismissed and they'll be approved quickly. The business has kept them on for an extended period, and suddenly decided their performance was not up to snuff, just as they were being sold or restructured. So you're not going to be able to show a clear valid trail of disciplinary measures for their supposed poor performance or a pattern of job related misconduct, and they'll be approved to draw benefits anyway.

If you have a poorly performing employee, discover that you have made a "hiring mistake," it's good to get rid of them quickly. This way, though you will have only a tiny liability for unemployment, or perhaps none, if you move quickly enough, you'll have a clear cut performance issue/tardiness/attendance/insubordination problem. They may get to draw anyway, but it won't hurt your bottom line much if at all. If you allow marginal employees to languish in your company for years, not dealing with the problems proactively, then you'll end up with probably not enough of any one issue to terminate for without having to pay unemployment benefits, all of which will be charged against your account. If they were good enough to keep for five or six years, it's then much more difficult to come in and try to show a misconduct reason for termination related to "they weren't doing a good job" or anything else.

I disagree with you a little bit.

Many people who buy a business, buy only the assets of that business and they buy those assets using a brand new "shiny" as you call it, business. It is done for very valid financial reasons, because the new company is not interested in being responsible for the debts/liabilities of the original owners. In other words, if they couldn't buy the assets only, they would have zero interest in purchasing the company.

This is not a case of the old owner wanting to start over. This is the case of a son in law wanting to buy the business from his father in law and he may not want his father in law's baggage...nor does he have to take that on. If he does an asset only purchase, he is NOT going to be stuck with his father in law's experience rating.

 

[LeeHarveyBlotto]

Thank you (and everyone else) for the information.

We would be changing the name for liability reasons only, my father in-law would actually become an employee so he would still be around.

I just hate the fact of having to pay unemployment for less than stellar employees that have just skated along for years.

Yeah, that unemployment is such a gravy train.

 

[mitchelt]

It's clear to me that you (plural) are simply trying screw someone. (spit)

Thank you for your comments and your incorrect assumptions.

 

[Zigner]

Thank you for your comments and your incorrect assumptions.

One is glad to be of service.

ETA: You're changing owner for liability reasons - that means that somebody somewhere likely has a claim against your father-in-law and you're trying to make sure they can't touch the company. In other words, they're screwed.