Asset vs. Share Purchase
What are the differences between both from a tax perspective? I'm curious to hear what would be more attractive in terms of tax efficiency for both the acquirer and the seller?
What are the differences between both from a tax perspective? I'm curious to hear what would be more attractive in terms of tax efficiency for both the acquirer and the seller?
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Buyers want asset sales so they can take a step-up, sellers want stock sales to ensure they're taxed at capital gains rather than ordinary income rates. In an LLC sale, buyers can often get a step-up in a stock sale. Here's a good general overview (source: Google):
http://www.alliedbizgroup.com/resources/publications/asset-sale-vs-stoc…
Also in an Asset Sale you can amortize goodwill.
Thanks fryguy22... Very useful information. I'm trying to understand if the favorable taxes of an asset purchase (due to step up of tax base and future benefits from higher depreciation) outweigh the pain of getting waivers from the sellers existing creditors (due to the Bulk Sales Law)... Also, I've heard that with an Asset purchase, you would have to fire and rehire (if that is your intention) the employees managing those assets. Is there a strategic way around this? I feel like a share purchase would eliminate this burden.
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