Business Purchase & Sale Series - Types of Deals
Negotiating the purchase or sale of a business can be a complicated process, one that should be navigated with the help of an attorney. This month, we’ll explore some of the important things you should know before embarking on this process.
Today, we’ll be talking about the different types of deals you might encounter whether you are buying or selling your business.
In an Asset Sale/Purchase arrangement, the buyer and seller negotiate over specific assets that the existing business owns and liabilities that the buyer will assume, if any. This arrangement typically limits the liabilities of the buyer as they are purchasing items like inventory, physical space and customer lists or assuming debts like a capital lease, rather than the entire business.
In a Stock Purchase agreement, the buyer purchases some portion (or all) of the existing company’s stock from its stockholders. The existing company remains intact but with new ownership. Due diligence and inspections (which we’ll cover later in the month) are especially important with this type of purchase because all company liabilities normally attach to the stock.
In a merger, two companies combine to form a new legal entity. The new company is responsible for all of the existing legal obligations that the original companies owe, including pending lawsuits. Usually, a mergerer requires approval from the majority of shareholders from both companies.
Under Florida law, each of these types of transactions has specific management and tax consequences. Consulting with both an attorney and a CPA is an essential component of the sale or purchase of a business.