Buying A Business: Asset Sale vs Stock Sale

Normally (with a few exceptions), when a business broker lists a small business for sale in Florida, it is what’s known as an ‘asset sale.’ An ‘asset sale’ in this sense means that the buyer is not purchasing the company’s business entity, such as their LLC or C-Corp name, as that would technically be purchasing the stock of that company. What a buyer is purchasing is all of the assets owned by the business that is selling: tangible assets, such as equipment and intangible assets such as their DBA (Doing Business As) or fictious name, customer list, goodwill, website, reputation etc.

Not purchasing the business entity is actually a benefit to the buyer. The buyer creates their own business entity, which is all their own. They won’t have to deal with possible liability issues that can arise by taking on the previous owner’s business entity. Unlike a stock sale, the buyer obtains the assets usually free and clear of any liabilities of the seller, and this is guaranteed in the purchase contract. This way, the buyer has a fresh new business entity that will take ownership of all of the assets purchased from the previous owner.

Some businesses, the healthcare industry for example, have government contracts that are tied to their business entity name, and wouldn’t transfer with the business asset sale. Therefore, it is sometimes necessary to do a stock sale when selling a business. Or there are occasions where maybe one partner wants to buy out another partner. That would usually constitute a stock sale as well. A business broker can help facilitate these types of transactions too, but because we don’t carry a securities license, we need to partner with an attorney to get the job done legally. This is something that we have experience doing, and we have the right legal counsel to assist us with it.