Purchasing Assets Versus Stocks
Buying an existing business can be puzzling if you're doing it for the first time. Once you find a business you want to purchase, which is the best way to buy it? What's the difference between an asset purchase vs a stock purchase? How do you cash flow forecast?
Structuring a business deal can be complicated if you don't know the difference. To protect yourself, it is worth the money to enlist the help of a corporation attorney so you aren't responsible for liabilities you don't want. There are differences between an asset purchase and a stock purchase. Be informed before you buy.
A stock purchase basically means you are investing and buying everything the seller owns including stocks, assets, and liabilities. With a stock purchase you are also buying the entity itself meaning you own the name of the business or entity. This is attractive to the seller because they walk away with no leftover responsibilities for the business.
On the other hand, with an asset purchase, the seller retains the stock and you may only be responsible for liabilities outlined in the sales or purchase agreement. With an asset purchase, you are usually required to form your own business structure, corporation, or limited liability company. This type of purchase is more attractive to a buyer who can pick and choose which liabilities they want to assume and which assets they want to purchase.