Asset Sale vs Stock Sale

November 06, 2020
by a searcher from Columbia University - Columbia Business School in Princeton, NJ, USA
I understand asset sale is typically better for buyers from a liability standpoint, but can an expert on this matter provide some rules or guidance? This company has $1M of assets, of which $800K is in cash and $100K in fixed assets. No AR or AP.
Few questions:
1. Do I keep the cash accounts and fixed assets in an asset sale? What about the liabilities?
2. Can I create an LLC to buy the business instead of under my personal name?
3. Are there any tax implications or advantages for an asset sale as a buyer or seller?
from Campbell University in Emerald Isle, NC 28594, USA
Sounds like the business may not necessarily have a lot of PP&E compared to the amount of cash you listed it having and possibly generating. Just a guess. A business with low CAPEX cost from year to year is a positive in my book.
from University of Wisconsin in Plymouth, MA, USA
2. Yes, I would always use a LLC or some form of SPV
3. Stock sale is better for seller because proceeds are taxed as capital gains (lower tax rate). Asset sale is better for buyer due to depreciation/amortization advantages. Pretty good article on it from buyer POV here: https://corporatefinanceinstitute.com/resources/knowledge/deals/asset-purchase-vs-stock-purchase/