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What is an asset sale and when would you sell and existing business using this?

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The BAF Group LLC

I am not an attorney, but from an operative perspective, I believe you are talking about the difference between selling the assets of the company, and selling the stock, and thus the company or corporation, itself. When you sell the assets, you are selling the name, the contracts, the equipment...virtually everything the company owns, but you are not selling the stock of the company and - this is the big thing to remember - you are not selling the liabilities. So, if the company owes bills, if it has loans on the books, your company still owes that money, once the deal is done. You still own the company, even though the business is gone, and the company still has those liabilities to deal with.

If the Buyer purchases the stock of the company, he/she is buying the company or corporation itself. This means that he/she owes any outstanding debts the company has, as well as the assets.

Most Buyers' attorneys in small businesses will tell the Buyer NOT to buy the company or corporation. Their position is that you never know what liabilities are out there, that can come back to haunt the new owner. So, in selling the business, it is frequently not your decision to make, unless you want to refuse offers that are only made for the assets.

You need to talk to your attorney and your accountant about which way your business should be positioned. But in the vast majority of small businesses, selling the assets is the easiest, fastest and most profitable way to go.

May 7, 2012

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