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March 25, 2026
By: James J. Riebandt

Is It Assets? Is It Stocks? That’s the Question!

When purchasing a business, one of the most important initial decisions is how the transaction will be structured. Will the Buyer purchase the Seller’s assets, or will the Buyer purchase the Seller’s stock or ownership interest? This article highlights the key elements involved in each type of transaction.

In an asset sale, the Buyer acquires some or all of the contents of the business, such as equipment, inventory, and other assets. In a stock sale, the Buyer acquires shares, or in other words, equity in the business.

In an asset-style sale, Buyers can pick and choose which assets they want to purchase. They can take all of the business assets or exclude some, and they do not have to take on liabilities such as loan debt, provided, of course, that the Seller agrees to the terms. Most Sellers, however, prefer to find a Buyer willing to take all or most of the assets.
Buyers who acquire a business through a stock sale purchase the business as it currently exists. If the business has debt, the debt comes along with the transaction. If lawsuits are pending against the business, the new Buyer might be responsible for defending against them.
Tax advantages for Buyers and Sellers also differ between asset sales and stock sales.
Sole proprietorships, partnerships, and limited liability companies can be sold only in asset transactions, because their owners are individuals rather than shareholders. However, Buyers of S-Corporations and C-Corporations can structure the acquisition using either method.
Asset sales are generally more favorable to Buyers, and stock sales are more advantageous to Sellers because of the way each is treated for tax purposes. However, Buyers and Sellers might have reasons besides tax benefits to choose an asset or stock sale.
All things being equal, asset sales can take longer to close, and the business may be priced differently than it would be in a stock transaction.
These are some of the advantages and disadvantages of asset sales:
Advantages of an Asset Sale:
  • You don’t have to purchase assets that are not profitable or that may add unnecessary costs to your business.
  • You don’t have to acquire liabilities that could become costly in the future.
  • Buyers may receive a step-up in tax basis for the acquired assets.
  • You can select only the employees you want to retain.
Disadvantages of an Asset Sale:
  • You might pay more for the business in an asset purchase.
  • It might take longer to close an asset sale.
  • Buyers may need to establish a new business entity or structure.

As far as stock sales, the biggest hurdle to completing the transaction is usually getting all of the shareholders to agree to the transaction. The more shareholders involved, the more difficult it may be to secure approval.

Here are some of the advantages and disadvantages of stock sales:
Advantages of a Stock Sale:
  • You can step into the existing business with fewer interruptions.
  • You may need less operating capital at the outset.
  • You begin with the company’s existing intellectual property.
  • You don’t have to apply for new licenses and permits.
Disadvantages of a Stock Sale:
  • You may inherit assets that are not useful to your business.
  • You assume the company’s liabilities along with its assets.
  • You don’t get the same tax benefits as an asset purchase.

Choosing between an asset purchase and a stock purchase can significantly affect liability exposure, tax consequences, and the overall structure of the transaction. Understanding the advantages and disadvantages of each approach is an important first step in structuring a successful deal. If you have questions about how these options may impact your business transaction, please contact Attorney James Riebandt at 847-698-9600, extension 2209.

Related Practice Areas

Business Transactions

Real Estate