Carve-Outs and Excluded Assets in Business Sales: What Stays, What Goes
When a small business sells its assets, not everything has to go to the new owner. Some items stay with the business, while others can be carved out and kept by the seller. Carve-outs are assets that are excluded from the sale. They can shape the deal by changing the purchase price, affecting day-to-day operations, and adding work to the transition after closing.
A carve-out isn’t the same as selling only part of a business unit. It’s simply keeping certain assets out of the deal. The excluded items might have personal value to the seller or a future use.
Understanding what stays and goes early in the process keeps the transaction clear and helps avoid any business disruption. When handled well, it helps both independent entities move forward with fewer surprises and better operational efficiency.
What Is a Carve-Out in an Asset Sale?
In an asset sale, the seller decides what goes to the new owner and what stays with the parent company. A carve-out is any asset the seller keeps, even if most similar items transfer.
Assets need to be listed in writing. They’ll be reviewed during due diligence to help the buyer understand what their new business will look like on day one.
In most small business asset sales, transactions are structured on a “cash-free, debt-free” basis. This means sellers typically retain pre-closing cash and accounts receivable, while also settling any outstanding debts or liabilities. These financial carve-outs are standard and should be clearly documented in the purchase agreement.
Carve-outs can include many types of property, some with more significant value than others:
- Buildings or land
- Vehicles or equipment
- Intellectual property
- Digital accounts
- Contracts
- Inventory
- Tools or software licenses
Common Carve-Outs in Small Business Transactions
Real Estate
In some cases, the seller owns the property where the small business operates. They might want to keep it for long-term rental income or believe the property will appreciate in value over time. As part of a carve-out, the seller might retain the real estate and lease the space to the buyer.
A clear lease is necessary in this scenario to help prevent future conflict. The buyer and seller should plan to review:
- Lease terms
- Renewal options
- Tenant rights (such as making changes to the space)
- Responsibility for repairs
Vehicles and Equipment
Many small businesses hold vehicles in the company’s name for the owner’s personal use or own specialized equipment the seller wants for a future spin-off. In a corporate carve-out or small business asset sale, the asset purchase agreement should list which vehicles and pieces of equipment transfer to the buyer—delivery trucks, core machinery, and any non-essential equipment. Buyers want a clear view of what supports core operations and what they may need to replace on day one.
Intellectual Property
IP can be one of the most sensitive parts of a small business sale. Defining IP boundaries helps avoid disputes and protects assets. Some sellers expect to keep their name or likeness. Others want to retain software, trademarks, or systems they developed long before they considered the sale.
A buyer is right to question the value of intellectual property:
- Can the new entity operate well without this IP?
- Does the business rely on the seller’s name?
- Are there synergies between the IP and the rest of the business?
Digital Assets and Accounts
Digital assets that connect the management team to customers and help run daily operations can be extremely valuable. Some sellers expect carve-outs for personal email addresses, domain names, social media, online review accounts (such as Google or Yelp), and software licenses.
If the buyer needs these items to run the new company, both sides may need to set up transition service agreements (TSAs) or shift ownership. Advisors will likely suggest divesting if the seller carve-out might cause conflict.
How Carve-outs Affect Valuation
Every part of a business has an associated value, so when assets are excluded from a sale, the purchase price usually drops. Buyers want to know exactly what they are paying for and how the remaining assets support the operating model. If the deal removes core assets like property, equipment, or important IP, the business valuation changes.
Purchase price allocation for tax purposes also shifts. Both sides need to understand how assets and liabilities are divided so the financial statements match the true structure of the transaction.
Carve-outs create negotiation leverage. A seller may be willing to remove certain items in exchange for a cleaner deal. A buyer may accept fewer assets if they gain stronger cash flow or better terms.
Buyers should assess whether any excluded assets—such as key equipment, intellectual property, or digital accounts—are essential to ongoing operations. If so, they may need to negotiate transition service agreements, leases, or replacements to ensure business continuity post-sale.
Is a Carve-out Right for Your Sale?
Some owners want a full exit. Others want to keep a few pieces for personal use or a future venture. A carve-out can support both goals. To succeed, clear communication, a simple roadmap for the transition, and a shared view of how the new owner will run the business as a standalone entity are essential.
When both sides agree to what stays and what goes, the sale moves with less friction. Both stakeholders benefit from a cleaner handoff and clearer value creation when they collaborate on a carve-out rather than treating it as an afterthought.
All carve-outs should be explicitly listed in the asset purchase agreement, typically in a dedicated “excluded assets” schedule. Clear documentation helps prevent misunderstandings and ensures both parties are aligned on what is—and isn’t—part of the deal.
If you’re selling your business and want to explore carve-outs to structure the deal, work with a business broker. Visit BizBuySell’s Business Broker directory to find an advisor to guide you through the sale.