Business Transactions
While no two deals are ever the same, the purchase and sale of a business will typically fall into one of three categories:
(1) An asset purchase simply means that you’re buying the assets of the business without necessarily buying the business entity itself.
(2) A stock purchase means that you take over the business by stepping into the shoes of the existing owners
(3) A merger refers to combining two or more existing businesses into one.
If you are planning on selling or in the midst of acquiring a business, contact us to find out what options make sense in your particular circumstances.
Asset Purchase
There are numerous pros and cons to each type of arrangement. From a buyer’s perspective, an asset purchase is sometimes the cleanest way to go. As a buyer, you could acquire all the assets of the business subject to an understanding that they would be free and clear of all liabilities. In contrast, a buyer agreeing to a stock sale can usually be held accountable for all debts and obligations of the corporation that’s being sold. For this reason alone, many buyers decide not to go with a stock sale.
Stock Sale
On the other hand, a stock sale can be much easier to accomplish, because it may involve nothing more than swapping a check for stock certificates. The transition process is sometimes much easier with a stock sale, too, because title to the business assets remain with the corporation. The buyer is simply stepping into the shoes of the stockholder.