Executive Summary
When companies are acquired or sold, there are two primary methods for completing the transaction: asset purchase and stock purchase. Both transfer ownership, but they operate in fundamentally different ways and carry distinct implications for taxes, contracts, employees, and risk. In an asset purchase, the buyer selects which parts of the business to acquire, including equipment, inventory, and contracts, while choosing which liabilities to assume. The legal entity remains with the seller. In a stock purchase, the buyer acquires ownership shares of the entire company, assuming control of all assets and liabilities. Nothing changes about the company itself; it simply has new owners. The right structure depends on the kind of company being sold, the tax positions of both parties, and the speed at which the deal needs to close.
How Each Structure Works
In an asset purchase, the buyer selects which parts of the business to acquire. These typically include equipment, inventory, buildings, and contracts. The buyer can also choose which liabilities to assume, such as unpaid bills or outstanding legal claims. The seller keeps anything not included in the purchase agreement, and the legal company remains with the seller. This gives the buyer a degree of control over what enters and what stays out.
In a stock purchase, the buyer acquires the ownership shares of the company. This means the buyer assumes control of the entire company, including all its assets and liabilities. All contracts, licenses, and relationships remain with the company unless specific change-of-control clauses apply. Nothing about the company itself changes. It simply has new owners.
AI-assisted insights, supplemented by 25 years of finance leadership experience.
