One of the major aspects of a business sale is whether the business will be sold as an asset or as stock. An owner might be thinking, “Does it really matter as long as I get the highest sales price?” Well, as you’ll see below, there are plenty of circumstances that can make a lower sales price more attractive.

To highlight some of the key differences between an asset and stock sale, let’s review some important tax, business liability, and complexity considerations.

Tax Rates

In a stock sale, the seller can realize the gain on his/her business at preferred capital gains tax rates.

Alternatively, an asset sale exposes proceeds to the seller’s ordinary income tax rates on certain assets, and if the company is sold as an asset through a C-Corp, the proceeds are exposed to double taxation (corporate tax and individual tax rates). The buyer, on the other hand, prefers an asset purchase from a tax perspective because he will have a “stepped up” basis, which allows for additional depreciation and/or limits the potential gain when the business will be sold again in the future.

Business Liabilities

Buying a business as an asset not only has tax benefits, but it reduces the buyer’s liability exposure as well. To protect himself from a future lawsuit due to the previous owner’s negligence, for example, a buyer will prefer an asset sale. The opposite, then, is true for the seller; he can still be held responsible for liabilities even after the business is sold, if it is sold as an asset.

In a stock sale, the buyer retains most of the business’ liabilities, even if they are unknown. There are, of course, exceptions as to what liabilities are separated from the buyer, but generally speaking, an asset sale will limit the buyer’s exposure to business liabilities.

Complexity and Expenses

An asset sale is more complex and costlier. In an asset sale, the specific assets and liabilities transferring are stated, and the gain/loss is calculated on each asset. This complexity adds fees for appraisals, legal titling, and accounting. Additionally, some assets (e.g., patents) are not transferable in an asset sale, which adds to the complexity.


You can see now how receiving a lower sales price might be more attractive if you are able to recognize proceeds at a lower capital gains tax rate, while limiting your exposure to business liabilities and saving fees and complications by structuring the business sale as a stock sale.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

Savant Wealth Management is a Registered Investment Advisor. Different types of investments involve varying degrees of risk. Savant’s marketing material and/or rankings should not be construed by a client or prospective client as a guarantee that they will experience a certain level of results if Savant Wealth Management is engaged, or continues to be engaged, to provide investment advisory services nor should it be construed as a current or past endorsement of Savant Wealth Management by any of its clients. Please see our Important Disclosures.