Small Business Owner: What Is The Difference Between An Asset Sale and A Stock Sale?

by Martin Hansen

Small Business Owner:  What Is The Difference Between An Asset Sale and A Stock Sale?

Basically, asset sales (APA or Asset Purchase Agreement) are the purchase of a business’s assets and, quite possibly, select liabilities. A stock sale (SPA or Stock Purchase Agreement) is the purchase of the owner’s shares in the corporation being purchased.

However, if the business is a sole proprietorship, a partnership, or a limited liability company (LLC), the transaction cannot be structured as a stock sale, since none of these entities have “stock.”  Owners of these types of entities can either sell their assets, or they can sell their partnership or membership interests.

If the business is incorporated, the buyer and seller must decide if they desire to structure the deal as an asset sale or a stock sale prior to executing a term sheet or Letter of Intent (LOI).

It is critically important to get professional advice regarding the best structure for the particular situation, as there are many considerations when negotiating the type of transaction, including, but not limited to, tax implications and potential liabilities.  For more information go to www.dealmaker360.com, and good luck!

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