An asset sale occurs when a buyer purchases specific assets of a business. From the seller’s perspective, asset sales can lead to higher taxes because some assets may be taxed at ordinary income tax rates. If the seller is a C-corporation, double taxation may apply.
- From the buyer’s perspective, asset sales allow for a "step-up" in basis, which allows them to depreciate the purchased assets, and they also avoid inheriting potential past liabilities. Buyers also get a clear breakdown of the assets they are acquiring. Asset sales tend to be more complex and costly due to the need for appraisals, legal titling, and accounting services.