There are basically two ways to buy or sell a business. Either a buyer can purchase all or a portion of the stock in the selling business, or instead, just buy the actual assets from the selling business. Each has distinctly different legal liability and tax characteristics.

When buying the stock, all the liabilities, known or unknown, follow the sale. Additionally, there are very few tax write-off’s for the buyer.

Alternatively, when only the assets are purchased, usually no liabilities follow them. And the buyer can then depreciate or amortize those assets over their useful life.   Finally, if the asset being purchased is real estate, there may be considerably different transfer tax implications. Therefore, whether buying or selling a business, it is critical that you get solid legal and tax advice up front, because the structuring of the deal can greatly affect the financial aspects of the transaction after closing.

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