Asset Purchase vs Stock Purchase When Purchasing a Business
Are you preparing to buy a business in San Diego, California? If so, it is crucial that you conduct the proper due diligence and ensure that the transaction is structured in the most advantageous manner possible. One of the key decisions that you will need to make is whether to proceed with an asset purchase or a stock purchase. In this blog post, our San Diego business law attorney provides an overview of asset purchase and stock purchases in California.
What is an Asset Purchase When Buying a Business?
With an asset purchase, the buyer purchases the individual assets held by the seller—not the seller itself. For example, an asset purchase may involve buying facilities, equipment, inventory, intellectual property rights, or other tangible and intangible assets held by the seller. One of the primary advantages of an asset purchase is that the buyer can more clearly define their scope of potential liability. They can effectively “pick and choose” the assets that they want to take on. Another useful advantage is that the buyer can surpass roadblocks thrown up by minority stakeholders in the seller that may not wish to sell their shares. Of course, this can be more complicated. All of the individual assets being purchased must be re-tilted.
What is a Stock Purchase When Buying a Business?
In contrast to an asset purchase, a stock purchase involves buying an entire business. In effect, the purchaser takes over the selling company—including all of its assets and liabilities. There are both advantages and disadvantages associated with a stock purchase. One notable advantage is that the purchaser can get access to non-assignable assets. For example, the selling company may have entered a favorable contract with a third party. You cannot necessarily “buy” that individual asset without the consent of the third party. However, when you purchase the stock in the selling business, you will get ownership over that non-assignable asset. Of course, the potential liability risk is higher with a stock purchase. The buyer will assume responsibility for the seller’s liabilities—meaning it is especially important to conduct thorough due diligence.
A San Diego, CA Business Lawyer Can Help You Determine the Best Option
Buying a business is complicated. Each transaction involves its own unique set of challenges. In some cases, an asset purchase is the more advantageous solution. In other cases, the purchaser may be better off pursuing a stock purchase. As an experienced business lawyer, our founder Kris Mukherji has the legal expertise that you can rely on. During a comprehensive and confidential consultation, we will review the specific circumstances that you are dealing with and help you determine the best way to move forward with the transaction.
Call Our San Diego, CA Business Lawyer for Immediate Assistance
At The Law Office of Kris Mukherji, our San Diego business law attorney is a diligent, experienced advocate for business owners and entrepreneurs. If you have any questions about asset purchases and stock purchases, we are here to help. Contact us today for a completely confidential case evaluation. We provide business law representation throughout San Diego County, including in San Diego, La Jolla, Chula Vista, Oceanside, Escondido, El Cajon, and National City.