Buying a Business: Asset vs. Stock Purchase

Understanding Business Acquisitions

Buying a business can be an exciting and scary time. It is important for every buyer (and seller) to understand what exactly they are buying. Sellers can choose to sell a business either as assets only or as membership/stock. Before purchasing/selling a business, interested parties may find it beneficial to consult with attorneys experienced in business acquisitions.

Asset-Only Transactions: What You Need to Know

In an asset-only transaction, the buyer will purchase all the company’s assets and hold the assets in a new company’s name.

Example: The Banana Stand Acquisition

An example would be a banana stand owned by Arrested Corporation. The assets of Arrested Corporation are the lease for the banana stand, the inventory of bananas, and cash on hand (collectively the assets). The buyer Development Corporation purchases the assets of Arrested Corporation and operates the banana stand as Development Corporation. Buying the assets allows Development Corporation to have the benefit from the hard work of Arrested Corporation without taking on any liability of Arrested Corporation (i.e. possible lawsuits).

Stock or Membership Interest Purchase: Understanding Ownership Transfer

A stock or membership interest purchase is where the buyer owns the corporation or LLC. This allows the company to continue on, just with different owners. The new owners take on the liability of the company prior to purchase unless the purchase agreement states otherwise. This is why it is so important to consult with business acquisition lawyers to make sure you know what you’re getting into before the transaction takes place.

Example: Ownership Transfer at Arrested Corporation

An example would be if Michael, sole owner of Arrested Corporation, sold all of his stock to Buster. Buster would now own the Arrested Corporation and its banana stand.

Consulting Business Acquisition Lawyers: Ensuring Informed Decisions

If you have any questions regarding selling or buying a business, or are interested in discussing the difference between assets and stock purchases, please contact the professionals at Allison L. Harrison Law, LLC by phone, (614) 440-1395 or via email at aharrison@alharrisonlaw.com to schedule a consultation with experienced business acquisition lawyers in Columbus.

Unlock Further Insights: Watch Attorney Allison's Explanation

For a breakdown of how to buy and sell a company, watch and listen to Attorney Allison explain!

https://youtu.be/uBhmDyQaHgA

Please note that the information contained in this article is intended for general informational purposes only and not as specific legal advice. The facts of your situation may differ from this general information. It is not intended to and does not in any way establish an attorney-client relationship. Persons and businesses do not become clients unless and until Allison L. Harrison Law, LLC agrees to act for them and that agreement is confirmed in a retainer agreement or other writing.