Business purchases/sales: Asset versus stock
The interests of business buyers and sellers often diverge when it comes to the decision between an asset deal versus a stock deal. An asset purchase is often preferable to buyers from a tax and liability perspective but operational considerations may favor of a stock purchase. A stock purchase usually allows a company's licenses and contractual relationships to continue. However, the buyer may prefer to buy the assets of the business in order to obtain the "step-up" (cost) basis of the company's assets. 26 US Code Section 338 provides a solution in certain situations by allowing the buyer to treat a stock purchase like an asset purchase for tax purposes. Similarly, Section 336 allows a seller to make a similar election. There are many, many factors to consider when buying or selling a business. Consult with your attorney and CPA as early as possible in the process.