When it comes to buying or selling a business, one of the first, and most important, decisions is how to structure the deal. Should you buy or sell the company’s assets, or should you buy or sell its shares? Each option comes with unique legal, tax, and operational consequences. Understanding these differences is key to choosing the approach that best suits your goals.
Selling Assets: A Clean Break
In an asset sale, the buyer selects and purchases specific assets and sometimes certain liabilities of the business, without taking over the legal company itself. This means the seller keeps the original company shell, while the buyer walks away with the chosen parts of the business.
This structure is often appealing to buyers who want a clean slate. Since the buyer is not acquiring the company itself, they generally avoid being held responsible for any past legal claims, tax debts, or employment issues tied to the seller’s business. There is also flexibility to take only the profitable or strategic assets, leaving behind those that are less desirable.
Another advantage is reputational. If the seller’s company has a history of poor credit or a bad name in the industry, the buyer avoids inheriting that baggage. However, asset sales are not without drawbacks. They often require multiple separate transfers of things like contracts, property, and licences, which can be time-consuming and complex. In some cases, higher stamp duties or VAT may also apply.
Selling Shares: Keeping Things Intact
A share sale works differently. Here, the buyer purchases all the shares of the company, taking over the business as a whole, including all assets, contracts, employees, liabilities, and obligations. From the outside, nothing appears to change: the business continues to operate just as it did before, but under new ownership.
This continuity can be a major advantage. Because the company remains intact, there is no need to renegotiate contracts or transfer licences. Stamp duties tend to be lower than for asset sales, and there is typically no VAT on the sale of shares. Employees also remain employed by the same company, helping avoid disruption and termination costs.
The main risk in a share sale lies in the unknown. By acquiring the company, the buyer also inherits its entire history, including any hidden liabilities that may only come to light after the sale. For this reason, careful legal and financial due diligence is essential before proceeding.
How to Choose the Right Deal Structure
There is no one-size-fits-all answer. The decision between an asset sale and a share sale depends on several factors, including your risk appetite, tax position, business objectives, and regulatory obligations. Buyers often prefer asset sales for the ability to limit exposure, while sellers may favour share sales for their simplicity and potential tax benefits.