Asset vs. Stock Sale


Sale of Assets:

  • Advantages
    1. purchasing assets, not liabilities
    2. stepped-up basis for depreciation and allocation of purchase price to assets
    3. pick and choose assets purchased
  • Disadvantages
    1. more complex closing documents including conveyance documents
    2. compliance with Bulk Sales Act and sales tax issues
    3. possible requirement for consent of franchisor, landlord (if any) and other parties having contractual relationship with seller
    4. depreciation recapture by seller


    Sale of Stock

  • Advantages
    1. simplicity and speed
    2. may not require franchisor, landlord (if any) or other party's consent except where recent or sophisticated agreement
    3. not subject to Bulk Sales Act
    4. avoid possible double taxation by seller
    5. walking into established credit lines of the seller's corporation


  • Disadvantages
    1. buying assets and liabilities of the corporation, including contingent and undisclosed liabilities
    2. assume existing depreciation schedule of assets and tax status of the corporation


    Before considering any stock sale of a corporation you must consult with competent legal counsel.

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