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

    Franchise Sales Compliance Guide

    Are you a franchisor or a part of a franchise sales team? Do you want to learn more about franchise sale compliance and ensure that your sales practices comply with franchise laws and are consistent with best practices? Then this guide is for you. In this guide you’ll learn the... read more

  • videoImg

    The Ultimate Guide to Franchising 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

    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 considering franchising your business? If so, its important to understand the advantages and disadvantages of franchising your business. Franchising is a legal and business model designed to achieve multi-unit expansion. Compared to organic expansion where you invest in and open multiple locations yourself, franchising allows you to recruit... read more

  • videoImg

    Documents to Start a Franchise

    The documents to franchise your business include the franchise disclosure document (FDD), franchise agreement, operations manual, financial statements, and state specific registration applications. Below we discuss each franchise document in detail. 1. Franchise Disclosure Document Before you can offer or  sell a franchise you are required to issue and disclose... read more

  • videoImg

    Is Your Business Franchisable and Should You Franchise?

    Franchising may be the next big step for your business and represents an opportunity to grow your brand. So, how do you know if franchising is right for you? How do you know if your business is franchisable and, if it is, whether or not you should franchise your business?... read more

all articles

  • videoImg

    Positioning Your Brand to Win at Franchise Sales

    In this webinar, Charles Internicola and Laura Meyer, founder of Joybrand Creative, talk about how to position your brand to win at franchise sales. Some topics include: How franchisors can develop their brand strategy How to differentiate your brand strategy between your targeted end-user customers and prospective franchisees for franchise... read more

  • videoImg

    How to Work With Franchise Brokers and Sell Franchises

    In this webinar, Charles N. Internicola, Esq. and Lisa Welko, CFE of Integrity Franchise Group discuss what it takes to make your brand attractive to franchise brokers and sell to qualified franchisees.  Selling franchises and building a durable franchise system - all comes down to being a "good franchisor," making... read more

  • 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

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