Buying a business: asset v. stock purchase

Allison Harrison

Allison Harrison

Business Acquisition Lawyers, Columbus OH

Buying a business can be an exciting and scary time. It is important for every buyer (and seller) to understanding what exactly they are buying. Business can be sold either assets only or the membership/stock. Before purchasing/selling a business, interested parties may find it beneficial to consult with attorneys experienced in business acquisitions.

When a sale is an asset-only transaction, the buyer will purchase all of the company’s assets and hold the assets in a new company’s name. An example would be a banana stand owned by Arrested Corporation. The assets of Arrested Corporation are the lease for the banana stand, the inventory of bananas, and cash on hand (collectively the assets). The buyer Development Corporation purchases the assets of Arrested Corporation and operates the banana stand as Development Corporation. Buying the assets allows Development Corporation to have the benefit from the hard work of Arrested Corporation without taking on any liability of Arrested Corporation (i.e. possible lawsuits).

A stock or membership interest purchase is where the buyer owns the corporation or LLC. This allows the company to continue on, just with different owners. The new owners take on the liability of the company prior to purchase unless the purchase agreement states otherwise. This is why it is so important to consult with business acquisition lawyers to make sure you know what you’re getting into before the transaction takes place. An example would be if Michael, sole owner of Arrested Corporation, sold all of his stock to Buster. Buster would now own Arrested Corporation and its banana stand.

For a breakdown of how to buy and sell a company, watch and listen to Attorney Allison explain!

If you have any questions regarding selling or buying a business, or are interested in discussing the difference between assets and stock purchases, please contact the professionals at Allison L. Harrison Law, LLC by phone, (614) 440-1395 or via email at aharrison@alharrisonlaw.com to schedule a consultation with experienced business acquisition lawyers in Columbus.

Please note that the information contained in this article is intended for general informational purposes only and not as specific legal advice. The facts of your situation may differ from this general information. It is not intended to and does not in any way establish an attorney-client relationship. Persons and businesses do not become clients unless and until Allison L. Harrison Law, LLC agrees to act for them and that agreement is confirmed in a retainer agreement or other writing.

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