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Should I buy the company or the assets of the company?

On Behalf of | Nov 14, 2023 | Business Consulting & Advice |

Generally, a business can be acquired in two ways. The purchaser can acquire either 100 percent of the company’s stock, giving them control over all the assets and liabilities. Or, individual assets can be identified and sold, while other assets remain with the seller.

There are pros and cons to both types of acquisitions.

The pros and cons of purchasing stock

Buying 100 percent of the shares of the company is generally much more straightforward, and the deal can be pushed through quickly. The downside of this is that the purchaser inherits all of the liability that comes along with the company’s assets. The purchaser of shares will also inherit the employees at the company.

This can be risky because the liabilities of the company at the time of the transaction are often unknown or unforeseeable. When purchasing a company this way, it’s important to conduct thorough due diligence to ensure legal protection. There may be contractual terms that can be included to withhold the full purchase price until liabilities become clearer.

The pros and cons of an asset purchase

An asset purchase is much more selective. The purchaser can identify precise assets that they wish to purchase and leave unwanted assets with the seller.

The advantage of this is that the purchaser may choose to leave assets that would involve unwanted liability. The downside of an asset purchase is that it can be much more complex. Legal documents will need to be drawn up for each individual asset transaction. While this method can reduce liability, it can also take a lot more time and effort to get the deal over the line.

Purchasing a company is a huge decision that requires careful consideration. We help guide individuals through legal transactions, contact us to book a consultation.