Asset Sale vs Stock Sale
The two ways a business changes hands — and one of them usually saves the buyer hundreds of thousands in taxes at your expense.
In a stock sale (or equity sale), the buyer purchases your company itself — the legal entity, with everything it owns and everything it owes. They become the new owner of the LLC or corporation, and the business continues with the same EIN, same contracts, same liabilities, and same tax position. In an asset sale, the buyer purchases specific assets of the business — the equipment, the inventory, the customer relationships, the brand — but not the legal entity. Your old company stays with you (typically liquidated post-close), and the buyer's new entity owns what they bought. The structural difference seems technical, but it has massive tax and legal consequences for both sides — and it's one of the most consequential negotiations in a small-business sale.
The structural difference between an asset sale and a stock sale has massive tax and legal consequences for both sides — and one of them usually saves the buyer hundreds of thousands at the seller's expense.
Buyers fight for asset sales whenever they can — partly for the tax write-up, partly to leave behind unknown liabilities.
Find out what a buyer would see in your business — before you talk to one.
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