In an asset sale, the buyer purchases the individual assets of a business, equipment, inventory, contracts, customer relationships, and goodwill, into a new entity, rather than buying the seller's company itself. Most known and unknown liabilities stay with the seller's old entity.
Asset sale vs stock sale
| Feature | Asset sale | Stock sale |
|---|---|---|
| Liabilities | Left behind | Assumed |
| Tax basis | Stepped up | Carried over |
| Contracts | Often reassigned | Stay in place |
| SBA preference | Common | Case-by-case |
The stepped-up basis lets a buyer re-depreciate assets, a real tax benefit that's a big reason buyers favor asset sales.
Why it matters when buying a business
Structure decides what you inherit. An asset sale shields you from the seller's past lawsuits, tax debts, and warranty claims, and gives you a fresh depreciation schedule. Buyers usually prefer it; sellers often prefer a stock sale for tax reasons, so it's a core negotiation in the LOI.
