Asset sale vs stock sale
An asset sale transfers specified assets and assumed liabilities, subject to applicable law. A stock sale transfers shares in the company, which retains its assets and liabilities. Tax basis depends on the jurisdiction, structure and any elections.
Asset sale vs stock sale at Hanil Widget Works
The stated Hanil balance sheet shows 32.1m of assets and 18.5m of liabilities. These are carrying amounts, not purchase consideration. In a stock sale, the company continues to hold its assets and obligations; the buyer acquires its shares. In an asset sale, the agreed assets and assumed liabilities transfer, subject to legal rules that may impose additional obligations.
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| Assets | Liabilities and equity | ||
|---|---|---|---|
| Cash | 4.20m | Accounts payable | 6.10m |
| Accounts receivable | 7.90m | Accrued expenses | 1.70m |
| Inventory | 4.70m | Total current liabilities | 7.80m |
| Total current assets | 16.80m | Long-term debt | 10.00m |
| Property, plant and equipment | 2.30m | Other non-current liabilities | 0.70m |
| Land | 11.00m | Total liabilities | 18.50m |
| Deposits and other | 2.00m | Owners’ equity | 13.60m |
| Total assets | 32.10m | Total liabilities and equity | 32.10m |
Source: IRS: sale of a business.
Terms Related to Asset sale vs stock sale
Purchase price allocation · Fraudulent conveyance · SPA / definitive agreement · Reps, warranties & indemnities · Debt-free cash-free · All of the glossary