This office does not handle:

  • Unemployment Insurance Benefits (UI)
  • State Disability Issues (SDI)
  • Worker Compensation Issues
  • EDD Overpayments

Over 50 Years In Practice
Over 500 Articles

The EDD: Successor Liability and Alter EGO Assessments

By Robert S. Schriebman

Materials from Mr. Schriebman’s book entitled California Taxation Practice and Procedure, published by Commerce Clearing House – CCH.

Successor Liability

The EDD has the power to issue a Notice of Assessment against the buyer or other successor of a business pursuant to CUIC 1731-1733. Any purchaser who does not avail himself or herself of the protection provided in the law becomes liable as of the date of the purchase of a business or as of the date his or her predecessor’s liability becomes final, whichever is later, for the amount due from the predecessor. The buyer, in order to protect himself of herself, should file a form entitled, “Discontinuance of Business Notice.” The buyer should also obtain a Certificate of Release from the EDD. A wise buyer will insist on obtaining a Clearance Certificate from the EDD prior to the close of escrow. This certificate is absolutely essential if the buyer or other successor wishes to avoid any type of transferee or successor liability.

If the purchaser of a business or inventory of goods does not request a Clearance Certificate from the EDD as set forth in CUIC 7131-7133, the purchaser can be billed or assessed for the predecessor’s liability to the extent of the purchase price. The EDD can also issue a jeopardy assessment against both the predecessor and the successor, pursuant to CUIC 1137.


Alter-ego assessments and collections are pursued by court action against the alter-ego of a corporation in those cases involving closely held corporations. In such cases where the shareholders are merely the alter-ego of the corporation, the courts will treat the shareholders and the corporation as one, rather than as separate entities, and hold individuals shareholders personally liable for corporate obligation.

Alter-ego pursuits are generally a last ditch effort by the EDD. They are also usually confined to large dollar cases, i.e., liabilities of $5,000 or more. The key element necessary to establish the alter ego theory is the control of the corporation by an individual, group, or other corporation for the purpose of working fraud on corporate creditors.


Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure”, both published by Commerce Clearing House.