Share Sale vs Asset Sale

Advice on the best way to sell your business

There are effectively two ways in which a buyer can acquire a business. A share purchase involves buying the shares of the company and the assets, whereas in an asset purchase the assets are bought directly from the business that owns them. Each method has its own advantages and disadvantages.

In a share purchase the buyer is purchasing the entire entity which will include all assets, liabilities and obligations, whether they are aware of them or not. Once the transaction is complete the buyer assumes responsibility for the whole company. For this reason there would usually be greater due diligence for a share purchase than an asset purchase. This method is generally favoured by the vendors as they are free from any further obligations related to the business. There are also tax advantages to a share sale as an asset sale can result in the seller being taxed twice, once on the gain made from the sale of the asset and again when the sale proceeds are distributed.

For the purchaser an asset purchase is often preferred as only the assets and liabilities that are identified in the agreement will be taken on by the buyer. Any other assets and liabilities will stay with the existing business and the buyer will not be responsible for previous actions of the business.

Whether you are buying or selling our commercial solicitors can advise on the most appropriate type of transaction for your specific business. We will review any agreements sent to you and negotiate with the solicitors to put you in the best possible position.

Call Business Lawyers Direct today on 0333 777 8003 or contact us via our online enquiry form and one of our senior solicitors will be pleased to discuss your requirements.