Different sale structures are used based on business goals:
Stock Purchase: Used to retain licenses, teams, or net operating losses (NOLs).
Asset Purchase: Preferred for acquiring equipment, intellectual property, or depreciation benefits, while avoiding liabilities or foreign reporting.
Here are a few examples of different sale structures:
A new company purchasing an existing company to enter a market might use a stock purchase to acquire existing licenses and team.
An existing company expanding operations by purchasing equipment from a competitor might use an asset sale, taking advantage of first-year depreciation and non-compete agreements.
A company buying a start-up with net operating losses (NOLs) might use a stock purchase to retain those losses.
A company buying intellectual property from a foreign company might structure it as an asset purchase to avoid foreign reporting.
A dry cleaner purchasing a competitor in another state may prefer an asset purchase because of depreciation benefits.
These scenarios highlight how different deal structures can be beneficial depending on the specifics of the businesses and the goals of the parties involved.
Seller-side versions of the same choice look different. A C corporation owner who qualifies for QSBS holds out for a stock sale, because an asset sale wipes out the federal exclusion and can trigger two layers of tax. A pass-through owner with little recapture and a buyer who will pay more for a clean step-up often accepts an asset sale, then fights to put as much of the price as possible into goodwill. A buyer who cannot get enough bank debt asks the seller to take a note. That can be an installment sale for the seller and a financing tool for the buyer. An equipment-heavy buyer pushes an asset sale for depreciation. The seller prices the ordinary-income recapture into the headline number, or walks.
The right structure is the one that leaves you with more after-tax cash at a risk you will accept. Run the same purchase price both ways before you treat the buyer's first draft as the deal.