Asset sale vs. stock sale

Definition

Buying the assets and leaving the liabilities, or buying the entity.

Why It Matters

The structure drives taxes, which liabilities you inherit, whether key contracts and licenses carry over, and whether you have to rehire everyone or simply inherit them, so it is worth real money to whichever side it favors. Name it in the LOI, not the closing week. Nearly every SBA-size deal is an asset purchase for the clean liabilities and the stepped-up basis, and a seller pushing for a stock sale is usually protecting something.

In numbers: Pay $1,500,000 for the assets and that price becomes your tax basis, written off over the years ahead: the equipment quickly, the goodwill over fifteen years. Buy the stock instead and nothing resets: the company keeps depreciating the $300,000 its equipment cost years ago, most of it already used up, and its old liabilities come along too. Those write-offs are why nearly every SBA-size deal papers as an asset purchase.