When should you use a stock sale as opposed to an asset sale?

New Jersey business transactions attorney, Harold I. Steinbach, explains why generally companies perform asset sales and not stock sales.

Contact Harold I. Steinbach

Email: [email protected]

Phone: (201) 525-1990

Transcript:

In the real world, pretty much except for if there’s extenuating circumstances you’ll do a stock deal. In other words, if there’s a net – often for tax reasons – if there’s a net operating loss you need to preserve or there’s too much of an imbedded tax in a C corporation or there’s a license that’s not transferrable you would do a stock sale. But those are the exceptions, although I have done three in the last two years but they’re unusual. Usually it’s an asset purchase agreement because a buyer wants to cherry-pick its assets. It doesn’t want to take over the seller’s liabilities and its particular afraid of liabilities that it doesn’t know about.