Get Letter Ruling 99-3: Casual And Isolated Sale Of Corporate Assets

Tax Rates. Generally, a stock sale is better for the seller and an asset sale is better for the buyer. In a stock sale, the seller can realize the gain on their business at preferred capital gains tax rates. In an asset sale, any gains are exposed to the seller's ordinary income tax rate on certain assets.

An asset sale occurs when a business sells all or a portion of its assets. The seller, or target company, in this type of deal, is still legally the owner of the company, but no longer owns the assets sold. In a stock sale, the buyer acquires equity from the target company's shareholders.

Asset Sale – Capital Gains Tax Capital gains tax is the proceeds of your asset sale minus the original cost. You'll pay tax on the capital gain or loss on the assets sold. Here's a quick equation: Sale price — purchase price = net proceeds.

Complexity: Transactions within a share sale are less complex than in an asset sale. The only required transfer is the transfer of shares. An asset sale is more complex because it requires more documentation, including transfer papers and third party consent forms.

In the case of an asset sale, the main disadvantage is that liabilities are likely to stay with the seller. Ensuring that contracts, properties, employees etc remain in place can also be complex and time-consuming.

They are the two core methods for buying or selling a business. An asset purchase requires the sale of individual assets. A share purchase requires the purchase of 100 percent of the shares of a company, effectively transferring all of the company's assets and liabilities to the purchaser.

With a share deal the purchaser acquires the company ("the target") by buying the shares in the target. In the case of the asset deal, he buys the assets and the liabilities of the company along with the associated employment, contractual and legal relationships and has them transferred through singular succession.

In an asset sale, the seller retains possession of the legal entity and the buyer purchases individual assets of the company, such as equipment, fixtures, leaseholds, licenses, goodwill, trade secrets, trade names, telephone numbers, and inventory.