Many times when buying a business there are reasons why buying stock or buying assets is the better business decision.
Let's go through the advantages and disadvantages from a buyer's perspective:
Advantages & Disadvantages of an Asset Sale from a Buyer's Perspective
Advantages:
* No legal liability for the corporation prior to the purchase (but you will still be named in the lawsuit)
* No liabilities for employees
* Costs paid for the assets are depreciable (but taxable at time of purchase)
* "Clean" credit, reputation, workers comp, etc. (sometimes existing history is better)
Disadvantages:
* No established credit (many times vendors will put you on COD)
* Rehire the employees (typically they ask for raises)
* Negotiate transfer of leases & contracts (typically everyone wants more)
* New licenses
* Operating Capital
Advantages & Disadvantages of a Stock Sale from a Buyer's Perspective
Advantages
* Established credit
* Many times, no or minimal operating capital required
* Leases are in place (if they are in the corporate name)
* Contracts are in place (if they are in the corporate name)
* Employees are in place with worker's comp rate established
* Licenses are in place
* No public notification of the sale
* No sales tax on the FF&E
* No deposits required
* Corporation, tax & employment numbers & all documentation in place
Disadvantages
* Legal liability for the corporation prior to the purchase (Seller can indemnify & defend, if around)
* Assets are normally fully depreciated
* Sometimes stock is a hard sell to CPA's & lawyers
There are always exceptions to all of the above but most of the time these advantages and disadvantages hold true.
Contributor:
I am an experienced entrepreneur, attorney, & business professor. I & my EvergreenGold® team offer business owners sound advice & expertise to build business value & achieve profitable sales. Call me today for a business evaluation & SWOT analysis for your business anywhere in the USA.
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For over 25 years Peter Siegel, MBA has been providing niche business purchase financial advisory and loan placement services with SBA Loans, Non SBA Financing, Retirement Plan Conversions, Note Restructures, etc. Call me regarding business purchase financing and to get pre-qualified: 925-785-3118.
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The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups.
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If your business involves alcoholic beverage sales, we can help. Obtaining a liquor license transfer or selling a business with a license in California does not have to be a frustrating and overwhelming process. We have procured thousands of licenses for our clients.
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I am the Founder Of BizBen.com. I consult daily with intermediaries, business buyers, owner/sellers & advisors daily about buying and selling California small to mid-sized businesses. Contact me today about joining & utilizing BizBen, consultations, & advisory services.
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ABC license specialist and owner of ABC Licensing Services, Elaine Olshanetsky, has 25 + years of experience obtaining and transferring liquor licenses for clients. assisted new buyers as well as seasoned professionals.
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McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
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Laundry consulting, due diligence, buyer representation: We preview laundries for you and evaluate them. 28 years laundry industry experience: buying, selling, valuing, retooling, analyzing, consulting services for laundry buyers and entrepreneurs in California. Contact us today about our services.
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