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.
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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.