I Thought I Bought The Whole Company – No Just The Assets

Written by James Sanders

A lot of times, there’s confusion when a business transaction is structured as an asset purchase.  Many think they are buying the whole company and all of its attributes.  Well, sometimes you are, but not entirely.

In an asset purchase, a buyer acquires specific assets (and sometimes assumes certain liabilities) of a company, instead of purchasing the entire company’s stock.

Key Features:

• Specificity: The buyer can choose which assets and liabilities to assume, allowing for a more targeted acquisition.
• Limited Liability: The buyer’s liability is generally limited to the assets and liabilities they agree to acquire.
• No Stock Ownership: Unlike a stock acquisition, the buyer doesn’t become a shareholder in the acquired company.  

Why Use It:

• Risk Mitigation: Buyers can avoid taking on unwanted liabilities or assets by selecting specific items.
• Strategic Focus: Buyers can acquire specific assets that fit their business strategy without acquiring the entire company.
• Tax Benefits: Asset acquisitions offer tax advantages (i.e, a “step up” in the tax basis of the acquired assets).

If you have questions about an asset acquisition structure, please make sure you talk with your professional business advisors.  Next week, we will talk about stock acquisitions.