SBA Acquisition Attorney in Arizona

Non-Compete Agreements

The lender expects a seller covenant that holds up, because the loan is underwritten on the goodwill the covenant protects.

Enforceable with blue-pencil modification available

Enforceable if reasonable. Arizona courts use a three-factor test: the restraint must protect a legitimate business interest, be no broader than necessary, and not impose undue hardship on the employee. Arizona follows the "blue pencil" doctrine, allowing courts to modify overbroad covenants.

Tax Considerations

Successor liability for unpaid state taxes falls on the borrower, so the lender requires clearance before the loan funds.

Arizona imposes a corporate income tax (flat 4.9% rate after recent reductions) and a Transaction Privilege Tax (TPT), which is the state's version of sales tax but is imposed on the seller. As a community property state, Arizona lets either spouse act alone on most community property, but joinder of both spouses is required for transfers of an interest in real property and for guaranty, indemnity or suretyship agreements, under Ariz. Rev. Stat. 25-214(C).

Filing Requirements

Spousal guarantees in community property states and buyer entity filings are lender closing conditions with their own lead time.

Mergers and entity conversions require filing with the Arizona Corporation Commission (ACC). Asset purchases of businesses holding professional licenses may require re-application. The ACC also oversees securities registrations.

Bulk Sales / Asset Purchases

Lender closing conditions include creditor notice or tax clearance where the state keeps them, and that timing sets the funding date.

Arizona has repealed UCC Article 6. However, Arizona Revised Statutes Section 42-1110 requires buyers of business assets to withhold a portion of the purchase price or obtain a tax clearance letter from the Arizona Department of Revenue. Failure to comply makes the buyer liable for the seller's unpaid taxes.