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Home Q&A Forum When asset purchase agreement vs. stock purchase agreement?

Business

Purchase Agreement

California

Asked on Oct 4, 2022

When asset purchase agreement vs. stock purchase agreement?

I am considering buying a business and I'm not sure what type of legal document I should use. I think I want to buy the business but I'm not sure what comes with that. The deal size is ~$100k and it is a printing company.

2 Attorney answers

Answer

Business

California

Answered 646 days ago

Christopher M.

ContractsCounsel verified

Business Lawyer
Licensed in California
Free Consultation

A stock purchase agreement only deals with the sale of stocks (which I know sounds a little obvious). The practical effect of which is you would own a percentage share of the company if that company is a corporation. If you used a stock purchase agreement the company would remain intact as a legal entity that you would have control over. If the company isn’t a corporation, or you’re not looking to keep the company intact, an asset purchase agreement would be you purchasing the assets of the company (up to and including the name and place of business) without necessarily taking control of the legal entity itself. Really which ever one you use they can both be drafted to accomplish your goals and more information would be needed to assess which one is right in your specific situation.

Use of the ContractsCounsel Q&A Forum does not create an attorney-client relationship between User and any Lawyer User. The Forum is not a substitute for legal advice from a lawyer but is intended to be educational and to help the user determine if legal services are necessary. The Forum, Content, and communications on the Forum do not constitute legal advice.

Answer

Business

California

Answered 646 days ago

Michael M.

ContractsCounsel verified

Business Lawyer
Licensed in California
Free Consultation

The nature of the purpose is of essential importance in any acquisition and the first decision that should be made. The 2 traditional types are either "asset" or "stock". In a stock transaction you purchase the shares of the corporation or membership interests of an LLC. In an asset sale, only assets are acquired. Each of these has major tax and liability implications that should be discussed with counsel and your cpa.

Use of the ContractsCounsel Q&A Forum does not create an attorney-client relationship between User and any Lawyer User. The Forum is not a substitute for legal advice from a lawyer but is intended to be educational and to help the user determine if legal services are necessary. The Forum, Content, and communications on the Forum do not constitute legal advice.
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