Are you thinking about selling your business but don’t know where to start? It’s important to understand the different terms and types of transactions available to you as a seller. One type of transaction is an asset sale, and it’s important to understand what it is and how it works. In this article, we’ll discuss what an asset sale of a business is, how it differs from a stock sale, and the associated benefits and drawbacks.

What is an Asset Sale of a Business?

In an asset sale, you (the seller) retain possession of the legal entity used to operate your business, and the buyer purchases the individual assets of the business. Asset sales are types of business transaction where buyers purchase assets from a business, and the sellers retain legal ownership of the company. They carry the advantage of allowing the seller to keep ownership of the company and any liabilities that come with it, and the buyer can purchase assets that are specifically tailored to their own needs.

An asset sale is the purchase of individual assets and liabilities, whereas a stock sale is the purchase of the owner’s shares of a corporation. While there are advantages and disadvantages to both types of transactions, an asset sale gives the buyer the opportunity to choose which assets they want to buy.

What Assets Are Typically Included in an Asset Sale?

A business usually has many assets. When sold, these assets must be classified as capital assets, depreciable property used in the business, inventory, and so on. The assets in an asset sale typically include:

  • Equipment
  • Inventory
  • Real estate
  • Accounts receivable
  • Intellectual property
  • Goodwill
  • Leasehold rights
  • Trade names
  • Customer lists

An asset sale involves the purchase of individual assets and liabilities. Asset sales, like most transactions, are generally cash-free, debt-free transactions. An asset sale occurs when a company transfers ownership of one or more resources to another company. Assets included in a sale may be tangible, such as equipment, inventory, or real estate, or intangible, such as customer lists, trade names, or intellectual property.

Benefits and Drawbacks of an Asset Sale

One of the main benefits of an asset sale is that the buyer does not assume the liabilities attached to the business. This means that the buyer does not have to worry about taking on any debts or obligations of the company. Additionally, the buyer can tailor their purchase to their own needs, selecting only the assets and liabilities that are needed for their business.

On the other hand, the main drawback of an asset sale is that the buyer is not acquiring the entire business and may not be able to benefit from the same economies of scale. Additionally, the buyer may not be able to benefit from tax advantages associated with the purchase of the entire business.

If you are considering selling your business, it is important to understand all of the options available to you. An asset sale of a business is one of those options that can provide a number of advantages to both the buyer and the seller. If you are looking for more information on asset sales and other types of business transactions, Atlantabusinesses.com is a great resource for answers to all your questions about selling a business and about business brokers.

What is included when selling a business’s assets?

In an asset sale, the seller remains the legal owner of the company, while the buyer acquires separate assets of the company, including items like machines, furnishings, leases, permits, reputation, trade secrets, business titles, phone numbers, and stock.

What are the advantages of a seller going through with an asset sale?

Sellers tend to be drawn to stock sales due to their ease and the beneficial tax rate. The full amount made from the sale is subject to a lower capital gains tax, and C corporation companies can avoid paying any corporate taxes.

What is one instance of an asset sale?

A rental car business may opt to transfer ownership of its vehicles and other assets necessary to operate through an asset sale agreement. This would involve selling all of the items required to run the business to a new owner via a business sale contract.

What are the advantages of purchasing assets?

The corporation has no responsibility for any legal matters before the purchase is completed. Employees are let go at the end of the sale process, even if the buyer is planning to re-hire them. The expenses for the assets are eligible for depreciation.