Short answer
- Buyers prefer asset purchases: they leave liabilities behind and get a stepped-up tax basis.
- Sellers often prefer stock sales: cleaner exit and, for C corporations, one layer of tax instead of two.
- In Florida, successor tax liability under s. 213.758 applies either way.
The basic difference
In an asset purchase, the buyer buys specific assets and assumes only the liabilities it agrees to. The seller's company stays with the seller, along with its past. In a stock purchase (or a purchase of LLC membership interests), the buyer buys the company itself, with every asset, contract, license and liability it carries, known or not.
Most small business sales are asset sales. Buyers prefer them, and they're the default in SBA-financed deals, though SBA loans can finance either.
Side by side
| Asset purchase | Stock purchase | |
|---|---|---|
| Liabilities | Buyer takes only what it agrees to | Buyer inherits everything, including unknown claims |
| Buyer's taxes | Stepped-up basis: buyer can depreciate and amortize the price, including goodwill over 15 years | Buyer inherits the company's existing tax basis |
| Seller's taxes | Mix of capital gain and ordinary income (depreciation recapture); double tax for C corporations | Usually all capital gain; single layer of tax |
| Contracts and leases | Must be assigned; consent often required | Stay with the company, unless they have change-of-control clauses |
| Licenses and permits | Buyer usually needs its own | Entity-level licenses often stay; individual licenses don't |
| Employees | Terminated and rehired by the buyer | Stay employed by the same company |
Why buyers prefer asset purchases
- They leave behind lawsuits, warranty claims, tax problems and other liabilities they can't see.
- The stepped-up basis creates tax deductions that improve cash flow for years, which also helps with SBA debt coverage.
- They can choose which assets and contracts they want.
Why sellers prefer stock sales
- Cleaner exit: the liabilities go with the company.
- Often lower taxes, especially for C corporations, which face two layers of tax in an asset sale: corporate tax (including Florida's 5.5% corporate income tax after a $50,000 exemption) and then tax on the distribution to shareholders.
- Fewer consents: contracts and leases may not need to be assigned.
For S corporations and multi-member LLCs taxed as partnerships, the tax gap between the two is often smaller, and there are tools, such as an F reorganization or a Section 338(h)(10) or 336(e) election, that can give the buyer asset-sale tax treatment while the legal form is a stock sale. Single-member LLCs are generally treated as asset sales for federal tax either way. These are CPA and attorney decisions, made before the LOI.
Florida-specific points
- Successor tax liability applies to both. Florida Statute 213.758 covers buying more than 50% of a business, its assets or its stock. Holdbacks and DOR compliance certificates matter either way.
- Sales tax on asset transfers. In an asset sale, equipment and fixtures can qualify for Florida's isolated-sale exemption if the transfer is completed within 30 days of the sale agreement. Inventory and titled vehicles are excluded. A stock sale doesn't transfer assets, so this usually doesn't arise.
- Licenses tied to individuals don't transfer either way. A Florida contractor's qualifying agent is a person, not the company.
- Allocation in an asset sale is reported by both sides on IRS Form 8594. It sets the buyer's deductions and the seller's tax bill, so negotiate it, don't leave it to the closing week.
How to decide
Run both structures through after-tax numbers for both sides. Often the answer is an asset sale at a slightly higher price, which leaves the seller roughly whole after taxes while the buyer keeps the liability protection and tax deductions. I model both before the LOI so the structure becomes a negotiating tool instead of a closing-week surprise.
FAQ
What is the difference between an asset purchase and a stock purchase?
In an asset purchase the buyer buys selected assets and assumes only agreed liabilities. In a stock purchase the buyer buys the company itself, including all of its liabilities.
Why do buyers prefer asset purchases?
They avoid unknown liabilities and get a stepped-up tax basis, which lets them depreciate equipment and amortize goodwill over 15 years.
Why do sellers prefer stock sales?
The liabilities go with the company, and C corporation owners avoid paying corporate-level tax on the sale and then tax again on the distribution.
Can an SBA loan finance a stock purchase?
Yes. SBA 7(a) loans can finance either structure, though most small business acquisitions are structured as asset purchases.
Sources
- Successor liability, s. 213.758 (Brewers Law)
- Occasional and isolated sales, Rule 12A-1.037 (Cornell LII)
- Florida corporate tax overview (Zenind)
This guide is general information, not legal, tax or lending advice. SBA rules and Florida law change; confirm current terms with your lender, attorney and CPA.