“Caveat Emptor”—Buyer Beware—is not just a saying; it is the legal standard in most commercial transactions. In New Jersey, specific statutes create unique traps for the unwary buyer. If you fail to identify these issues before closing, you may inherit debts and legal headaches that far exceed the value of the deal.

1. The “Bulk Sales” Tax Trap

New Jersey has an aggressive Bulk Sales Law (N.J.S.A. 54:50-38).

• The Problem: If you buy a business’s assets and fail to file Form C-9600 with the NJ Division of Taxation at least 10 days before closing, you become personally liable for all of the seller’s unpaid state taxes. This includes sales tax, payroll tax, and corporate business tax.

• The Risk: You could receive a tax bill for $50,000 or $500,000 years after the seller has left the state.

2. The Environmental “Time Bomb” (ISRA)

New Jersey’s Industrial Site Recovery Act (ISRA) is one of the strictest environmental laws in the nation.

• The Problem: If the business you are buying falls under certain industrial classifications (NAICS codes), the transaction cannot proceed until the site is remediated or certified clean by the NJDEP.

• The Risk: Buying a “clean” manufacturing plant only to discover you are now responsible for a $2 million groundwater cleanup because ISRA compliance was ignored.

3. The “Independent Contractor” Misclassification

• The Problem: Many NJ small businesses rely on freelancers to keep costs down. However, New Jersey uses the strict “ABC Test” to define employment.

• The Risk: If the target company has misclassified workers, you could be inheriting years of unpaid unemployment insurance taxes, overtime claims, and Department of Labor penalties.

4. The Intellectual Property “Handshake”

• The Problem: The seller claims they own their software code or brand, but the original developer was a freelancer who never signed an assignment agreement.

• The Risk: You pay for the IP, but you don’t actually own it. The developer could sue you for copyright infringement or hold the code hostage.