Asset Purchase Agreements Compared to Stock Purchase Agreements | Internicola Law Firm

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.

Learn More About Business Transactions

Let's Talk

With services to make your growth strategy simple, cost effective, and with a team excited to help you, let’s talk about how we can help grow your brand. Click on the button below or call us at (800) 976-4904.

Top Resources for Franchising Your Business

  • videoImg

    How to Franchise Your Business

    In this guide you’ll learn the basics of franchising, how to franchise your business, and how to win at franchising. We’ll also take a deeper dive into legal requirements for franchising and why they matter, steps to take before and after you launch your franchise, and even some tips on... read more

  • videoImg

    Franchising vs. Licensing Book

    When considering expanding a business both franchising and licensing are possible options. In this guide, you'll learn the differences of franchising and licensing and understand how each will affect you. read more

all guides

  • None right now

all videos

  • videoImg

    Franchising Your Business: Advantages & Disadvantages

    Are you a successful business owner? Are you looking for ways to expand your business? If so, this article will provide the answers you need to decide whether franchising your business is the right step for you. In short, franchising allows you, the franchisor, to create a relationship among several... read more

  • videoImg

    Documents To Start A Franchise

    Under federal law, prior offering or selling a franchise in any state, franchisors are required to disclose a franchise disclosure document (FDD) to their prospective franchisees. In addition to federal law certain states, including the franchise registration states, require that franchisors register their FDD with the state. The legal documentation... read more

  • videoImg

    Is Your Business Franchisable and Should You Franchise?

    Franchising may be the next big step for your business and, like many other business owners and entrepreneurs, you may have questions like “is my business franchisable?” and “should I franchise my business?” So, how do you know whether or not franchising is right for you? In this guide, we'll... read more

all articles

  • videoImg

    Leveraging PR & Digital Media to Jumpstart Franchise Sales

    Key strategies to accelerate franchise growth for startup and emerging franchisors In this webinar, franchise attorney Charles Internicola and Nick Powills, founder of No Limit Agency and 1851 Franchise, discuss key strategies to accelerate franchise growth through PR and digital media. Some topics include: Steps franchisors should take when it... read more

  • videoImg

    Winning Insurance Strategies for Emerging Franchisors with Michael Porpora

    One of the biggest issues for emerging franchisors is not having a plan for insurance and system-wide protection. What do emerging brands need to know when they're starting off, who should they rely on, and how can they plan ahead? Get an insurance game plan to protect your franchise system... read more

  • videoImg

    How to Build a Great Franchise Logo & Brand with Dan Antonelli

    Key strategies for developing the right logo & trade dress to drive franchise growth with branding and design expert Dan Antonelli. Dan is the author of ‘Building a Big Small Business Brand’ and is the creative director of the branding firm KickCharge Creative. Learn how to drive franchise growth and... read more

all webinars

Let’s Talk

With services to make your growth strategy simple, cost effective, and with a team excited to help you, let’s talk about how we can help grow your business.

Fill out the following form and we’ll contact you as soon as possible. To reach our team directly, give us a call at (800) 976-4904.

An attorney client relationship is not established by submitting this initial contact information.

closeIcon