What are the advantages of a stock sale and an asset sale?

Minneapolis attorney Sally Grossman explains how a stock sale favors a seller and an asset sale is advantageous to a buyer.

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The advantage of a stock sale from the seller’s point of view, so my business owner would prefer usually a stock sale, and the reason is because when he or she sells the stock, it also takes all the liabilities, so it gets my business owner off the hook, so that’s definitely the preferred approach for the business owner, for the seller. The purchaser though, usually wants to get an asset sale, and the reason is, they don’t want all your liabilities. They don’t know what you were doing with the business before they took it over, they don’t want to take that stuff.

In addition, when there’s an asset purchase, they get to have a higher basis, so for assets that can be depreciated, there’s an income tax advantage to acquiring assets and being able to allocate part of the purchase price to those depreciable assets. So, usually the seller wants a stock sale and the buyer wants an asset.