Asset Purchase Agreements Vs. Stock Purchase Agreements

Before a business changes hands, one of the first things the buyer and seller have to decide is whether the sale will be an asset purchase or a stock purchase. The type of agreement they choose will set the sale in motion and determine what issues the parties primarily need to negotiate. Each of these agreements has advantages and disadvantages that must be carefully weighed at the outset of the process.

Asset Purchase Agreement

An asset purchase is an agreement to buy select, individual assets of a business, rather than the whole business. Such assets may be tangible or intangible. Items such as real property, inventory, equipment, trade fixtures, copyrights, trade secrets, trademarks, and Goodwill, may be included and valued in the agreement.
Asset Purchase Agreements are typically, but not exclusively, used when the buyer desires to separate itself from debts, liabilities, past bad press or brand recognition, unsuccessful previous operations, or the buyer needs those assets for an alternate purpose entirely.

Stock Purchase Agreement

Buyers and sellers sometimes favor a stock purchase over an asset purchase when the underlying business will remain in its current form, seamlessly to customers. In this type of agreement, the buyer buys all of the company’s stock, and thereby the company itself, taking the company as is, complete with all assets and liabilities. The majority of the company’s existing contracts and leases stay in place and transfer to the buyer, and the buyer ordinarily will not need to revalue or retitle individual assets.

Which type of purchase agreement is right for you? Contact Larsen Law Offices, LLC, for a consultation about your options for buying or selling a business. You can schedule a meeting with Attorney Susan Larsen by calling (303) 520-6030.