![]() ![]() That’s because the vendor may be eligible for a lifetime capital gains exemption of more than $800,000 when selling shares of a small business. In terms of taxation, sellers will probably prefer a sale of shares. As a buyer, the most important thing you can do to protect yourself when buying a business as a whole or in parts is to conduct due diligence. The most dangerous unknown liabilities often arise from the seller's pre-sale activities. But, the most dangerous unknown liabilities often arise from the seller's pre-sale activities.įor example, if the seller had been making and selling paint for 15 years before the buyer acquired the company through a stock purchase, the buyer can be liable for the injuries sustained by a painter who claims that the seller's paint contained toxic chemicals, even if the painter's injuries do not show up until several years after the stock purchase. ![]() ![]() An unknown liability might be money owed to employees or contractors that has not been properly recorded and has been overlooked by both the seller and the buyer. The buyer takes on all of the seller's debts and obligations, whether they're known or unknown at the time of the sale.Ī known liability might be a business loan that is recorded in the company's books. If you acquire a business through a stock purchase, that is, buying all or most of the company's stock from its shareholders, your company "steps into the shoes" of the other company, and business continues as usual. Purchasing a company’s stocks: The sellers preferred approach Be sure to complete your due diligence before deciding to go this route. But there are exceptions, such as when the buyer agrees to assume the debts, obligation or liabilities in exchange for a lower sales price, for example. Generally, in an asset purchase, the purchasing company is not liable for the seller’s debts, obligations and liabilities. Reduce your liabilities by purchasing the company’s assetsĪn asset purchase involves buying individual assets such as buildings, vehicles, equipment or inventory, rather than the whole business.įrom a buyer’s perspective, an asset purchase can be much more attractive because you get to pick and choose what part of the business you want to buy.Īn asset purchase is also more attractive for the buyer from a taxation point of view because the purchase price can be deducted from income over several years as depreciation. Growth & Transition Capital financing solutionsĪ big part of properly structuring the transaction will be to decide whether you want to simply purchase the company’s most interesting assets, or instead purchase the company as a whole by buying its shares. Kauffman Fellows Program Partial Scholarship Venture Capital Catalyst Initiative (VCCI) Industrial, Clean and Energy Technology (ICE) Venture Fund ![]()
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