Before purchasing an existing business, you need to decide whether you are buying the assets or the stocks of the business.
An asset purchase involves buying the selling company’s assets, which may consist of the facilities, equipment, vehicles, and stock or inventory. In contrast, a stock purchase entails buying only the stock of the company that is selling.
Most buyers now prefer purchasing the assets of an existing business compared to buying its stocks.
They often find that it provides numerous possibilities, which include, but are not limited to, the following:
1. In an asset purchase, you can specify the liabilities you are willing to assume, while leaving the others behind. When it comes to a stock purchase, you may be buying stock in a business that may have liabilities that are described as unknown or uncertain.
2. In an asset purchase, if the purchase price surpasses the aggregate tax basis of the assets you are buying, you can receive a stepped-up basis in the assets equal to the purchase price.
3. Take note that you can avoid the problems that may develop from minority shareholders who refuse to sell their stocks in the asset purchase.
The site assetprotectionatty.com noted that an attorney familiar with asset protection should help you get started
4. In an asset purchase, the seller and buyer are not typically asked to comply with the securities laws and regulations, state and federal. As such, it is less complicated from a securities law perspective.
5. In an asset purchase, you can amortize goodwill for tax purposes, over a period of 15 years.
It is unwise to decide on merits alone. As such, you also need to find out about the cons of buying assets against stocks before making your decision.
Consult asset protection attorneys or asset or stockbrokers to make sure you’re making an informed decision. After all, when it comes to purchasing a business, you are not merely buying a company, you may also be buying your future.