What is the difference between an asset purchase and a stock purchase?

In an asset purchase, the buyer acquires selected assets and only the liabilities it agrees to assume. In a stock purchase, the buyer acquires the company’s ownership and inherits all of its assets and liabilities, with the entity continuing unchanged.

Why do buyers usually prefer an asset purchase?

For liability control and a stepped-up tax basis. Buyers can leave the seller’s debts and unknown liabilities behind and depreciate the acquired assets from the price paid, which lowers future taxable income.

Why do sellers usually prefer a stock sale?

Because it is generally taxed at capital-gains rates and avoids the double taxation a C-corporation faces in an asset sale, and because it is a simpler, cleaner exit — the seller transfers ownership rather than selling assets out of an entity.

Do contracts transfer in an asset purchase?

Not automatically. Many contracts and leases require the other party’s consent to assign, and some licenses must be reissued. In a stock purchase, contracts usually remain in place because the contracting entity itself does not change. The asset-versus-stock decision affects taxes and risk for years, so it should be made deliberately, not by default. Reidel Law Firm helps Texas buyers and sellers structure deals and document them on a flat fee. Get help structuring your deal.

TEXAS BUSINESS LAW

Asset vs Stock Purchase: How to Buy a Business

Schuyler 'Rocky' Reidel July 16, 2024 4 min read

There are two basic ways to buy a business: buy its assets, or buy its ownership (stock or membership interests). The choice is not a formality — it determines which liabilities the buyer inherits and how both sides are taxed, which is why buyers and sellers usually want opposite structures. As a rule, buyers prefer asset purchas