Dinn, Hochman & Potter, LLC
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What is the difference between an asset and stock purchase?

Starting a business is a huge decision. If business has been good to you, you may be thinking about acquiring another existing one. Before moving forward, you must first decide whether you are going to choose to purchase the business's stock or its assets. While this decision is best made with the help of an attorney, it wouldn't hurt for you to understand the pros and cons of both types of acquisition.

If you choose to purchase a business through a buyout of its assets, you can purchase its facility, equipment, inventory and vehicles. Aside from being a fairly complex process, acquisition through asset purchase is a pretty common practice. You may also choose to acquire a business by simply purchasing the selling company's stock. However, this would not apply to the purchase of a sole proprietorship, partnership or LLC.

One of the most beneficial advantages to an acquisition through asset purchase is that you typically can pick and choose which liabilities you would like to assume ownership. If you acquire a business through stock purchase, you may wind up owning liabilities you don't want. Another huge benefit of asset purchase is that you can avoid dealing with shareholders who refuse to sell. However, in companies that do not have many shareholders, the process of purchasing stock may be quite a bit less complicated than purchasing assets.

Although the acquisition of a business through asset purchase may take a while, it might be the right choice if you are concerned with federal and states securities laws. When you acquire a business through asset purchase you may not be required to comply with these regulations. This however, may not be the case with a stock purchase.

If you are in the market to purchase an existing company, it may be well worth your time to work with an experienced business law attorney. They can help you make the right decision on how to purchase a business based on your desired outcome and the company's overall health.

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