Resources 2


Asset Purchase vs. Equity Purchase Transactions

In connection with the sale/purchase of a business, understanding the key differences between asset purchase and equity purchase transactions can make all the difference in achieving your business goals.

Asset Purchase Transaction:

Key Elements:

  • Asset Specific: The buyer acquires specific assets and liabilities.
  • Entity Remains: The selling entity (limited liability company or corporation) remains with the seller.

Pros & Cons:

  • Sellers: Flexibility in choosing assets to sell but potential for residual liabilities.
  • Buyers: Selectivity in assets and potential for lower price but challenges in integration and due diligence.

Tax Implications:

  • More favorable for buyers due to depreciation/amortization deductions and avoidance of existing liabilities. Less favorable for sellers due to potential double taxation and higher tax rates on gains.

Equity Purchase Transaction:

Key Elements:

  • Whole Entity: The buyer acquires the entire ownership interest, including all assets and liabilities.
  • Continuity: The business continues to operate within its existing structure.

Pros & Cons

  • Sellers: Simplicity and complete transfer but potential for a lower price and detailed indemnifications and holdbacks if significant liabilities exist.
  • Buyers: Ease of transfer and retention of business identity (which is a significant plus for established operations with vehicles, equipment, and contracts) but may assume unknown liabilities and pay a higher price.

Tax Implications:

  • Generally, more favorable for sellers due to capital gains treatment and avoidance of double taxation. Less beneficial for buyers because of inheriting liabilities and limited tax deductions


  • Assets vs. Entity: Asset purchases involve selecting specific assets, while equity purchases entail acquiring the entire business (including the entity).
  • Liabilities: In asset purchases, liabilities can often be selectively assumed, while in equity purchases, all are transferred.


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