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Selling your business
ASSET SALE  or  SHARE SALE

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• 0. Selling your Business during a Crisis.  
 
• 1. Should I sell my business ?   Take this Quiz ....
 
• 2. Get Ready to Sell Your Business.  
 
• 3. 3 Key Considerations to Create an Effective Business-for-Sale Ad.  
 
• 4. The importance of photos in effective advertising.  
 
• 5. The Ad Title that Sells the Business.  
 
• 6. How to Choose Effective Categories for your Listing.  
 
• 7. Selling your business: ASSET sale or SHARE sale ?  
 
• 8. Some Hints for you When Selling your Business.  
 
• 9. How to Respond to Buyer Inquiries .  
 
• 10. Qualifying Buyers: Separating the sharks from the keepers.  
 
• 11. Ten things I should know when negotiating !  
 
• 12. Will I Get Top Dollar When I Sell My Business ?  
 
• 13. Prepare your Business for your Ultimate Customer.  
 
• 14. Is Your Business a Pain, or a Pleasure ?  
 
• 15. What Drives Owners to Sell & Buyers to Buy ?  
 
• 16. Frequently Asked Questions - by Jim Clark  
 
• 17. An Overview of the Business Selling Process.  
 
• 18. Recasting - a key to building value to the seller.  
 
• 19. What the Profit & Loss Statement Doesn't Tell You.  
 
• 20. How Do Buyers Determine Value when Considering a Business Purchase ?  
 
• 21. Why does Confidentiality Matter when Buying or Selling a Business ?  
 
• 22. Should You Buy an Existing Franchise?  5 Questions to Ask  
 
• 23. Succession Planning is central to selling success  
 

 
 DISCLAIMER 
 
These articles are for general information purposes only and do not constitute legal, accounting or other professional advice.  Important financial and legal decisions should be made only after seeking appropriate professional advice based on your specific situation.
Selling your business:  ASSET SALE  or  SHARE SALE

By:  Barbara Sloan, former Sales Rep at Sunbelt Business Brokers

BACKGROUND: The majority of small businesses we sell are set up as Corporations (as opposed to a Sole Proprietorship or a Partnership).  Usually one person owns 100% of the shares and takes a salary from the company.  If this is your situation, one of the first decisions you will need to make is whether to sell your business as an asset sale or a share deal - that is, if you are just selling the assets of your business, or if you are selling the company/the shares of the corporation.


Asset Sale - When you sell everything in the company but NOT your incorporated company

Possible Advantages

Possible Disadvantages
  • Buyer has no legal liability for the corporation prior to the purchase
  • Amount paid for the assets at market value can be depreciated by the Buyer and are often higher than their book value
  • If the business had a negative past, Buyer starts with "clean" credit, reputation, workers comp, etc.
  • Buyer has to establish new credit with suppliers
  • Buyer may still have liability for employees that firing and re-hiring cannot prevent
  • Buyer and Seller must negotiate transfer of leases & contracts
  • Licenses usually in company name and not transferable. Buyer needs to apply for new ones
  • Seller cannot take advantage of $500,000 capital gains tax exemption

 

Share Sale - When you sell your incorporated company and everything in it

Possible Advantages

Possible Disadvantages
  • Company already has established credit
  • Leases are in place - no transfer required
  • Contracts and licenses are in place
  • As there is no change of "employer", employees remain employed and are in place, with worker's comp rate established
  • No public notification of the sale
  • Seller can use $500,000 per shareholder capital gains exemption on shares of small business
  • Corporation, tax & employment numbers & documentation remain as is
  • Ability to utilize previous company losses
  • Buyer assumes the history and liabilities of the business prior to ownership. This can include tax, product, environmental or employee liability
  • Assets are normally fully depreciated
  • Sometimes share sale is a hard sell to CPA's & lawyers who are focused on protecting their client and not on the potential of the business.
  • Seller will be asked to provide wider protections by the Buyer in the Purchase & Sale Agreement. This could include personal guarantees by the Seller and spouse for liability issues which surface post-purchase and/or money held in escrow.

 
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