Asset Sale vs Stock Sale
The single structural choice that moves after-tax proceeds the most. Buyers and sellers have opposed interests here, and the answer depends on the entity, the basis, the assets, and what licenses and permits the company holds.
Asset Sale vs Stock Sale
The single structural choice that moves after-tax proceeds the most. Buyers and sellers have opposed interests here, and the answer depends on the entity, the basis, the assets, and what licenses and permits the company holds.
| Feature | Asset sale The buyer purchases the assets, not the entity | Stock sale The buyer purchases the entity itself |
|---|---|---|
| Who prefers it | Buyers, in most cases | Sellers, in most cases |
| Tax effect on the buyer | Step-up in basis and future depreciation deductions | Carryover basis, no step-up absent an election |
| Tax effect on the seller | Can create ordinary-income recapture on depreciated equipment | Generally capital-gains treatment on the equity |
| Historical liabilities | Mostly stay with the seller | Transfer with the entity, so the buyer wants broader representations |
| Contracts and permits | Assignment required, and anti-assignment clauses can block it | Generally continue with the entity |
| Licenses | The buying entity needs its own, including any contractor license | An entity-held license generally continues, subject to the qualifier |
| Employees | Technically terminated and rehired by the buying entity | Continue uninterrupted |
Our recommendation
Model both with a transaction-experienced CPA before negotiating, not after. The structure is a negotiating item like price, and a seller who understands the after-tax difference can trade structure for price deliberately. Where the company holds permits, an entity contractor license, or contracts with anti-assignment clauses, the practical case for a stock sale gets stronger regardless of tax.
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