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Business Transactions
- The Advantages of an Asset Purchase Compared to a Stock Purchase
- Factors to Consider when Buying a Gas Station
- The Importance of a "Financing Contingency" when Buying a Business
- The Importance of a "Non-Compete" when Buying a Business
- The Importance of "Sales Tax Notifications" when Buying a Business in New York
The Advantages of an Asset Purchase Compared to a Stock Purchase
If you are considering the purchase of a business or franchise one important factor that you must consider and discuss with your business lawyer will be the best method for structuring your purchase transaction. Business purchase transactions are structured either as (a) an asset purchase transaction (where you buy the assets of the sellers business) or (b) a stock purchase transaction (where you buy the stock of the sellers existing corporation). While stock purchase transactions do, sometimes serve a beneficial purpose, in most instances a business purchaser is best served by proceeding with an "asset purchase". The benefits to a business purchaser of proceeding with an "asset purchase", as compared to a "stock purchase", include:
• Reduced Liability.
In the asset purchase transaction, the purchaser acquires the assets of the seller and may negotiate what, if any, liabilities of the seller that the purchaser may be willing to assume. If done properly, in most asset purchase transactions, all liabilities of the seller are cut off. This option is not available in a stock purchase transaction where the purchaser is buying stock in a corporation that may be subject to undiscovered liabilities and lawsuits.
• Increased Tax Deductions.
In the asset purchase transaction, the purchaser is given the opportunity to fully value and "step up" the basis of the assets purchased. Basically, the assets, including goodwill, will be valued on the purchaser's books and records for amounts equal to the full amount of the purchase price and will therefore result in greater depreciation deductions that will benefit the purchaser down the road. In the stock purchase transaction, since you are purchasing stock - not the business assets - you inherit the existing financial statements of the seller that, in all likelihood will have seriously depreciated the assets of the business and have diminished the beneficial depreciation deductions that will be available in the future.
Charles N. Internicola, is a business attorney, author and speaker who represents individuals, entrepreneurs and established business owners in New York and New Jersey business transactions. Charles is the author of "An Entrepreneurs Guide to Purchasing a Business" and he is the publisher of the "New York Franchise Law Blog". If you are buying or selling a business in New York or New Jersey, purchasing a franchise or involved in a license or lease transaction Contact Charles Internicola to discuss the dedicated and precise legal representation that he provides to his clients and the steps that he will take to protect your business interests.
IMPORTANT DISCLAIMER: The information contained on this website is provided for general educational purposes only, should not be relied on as legal advice and does not serve to create an attorney client relationship. In utilizing this website you acknowledge that there is no attorney client relationship between you and Charles N. Internicola, Esq. and that the information contained on this site does not and cannot serve as a replacement for the competent legal advice of a licensed attorney in your state. The content of this website is subject to the Copyright of its author, Charles N. Internicola, Esq.
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