Asset Sale
The buyer purchases specific business assets rather than the legal entity that owns them.
01
What It Means
In an asset sale, the buyer acquires selected assets of the business — equipment, inventory, furniture and fixtures, customer lists, trade name, phone numbers, websites, contracts, and goodwill — while the seller generally keeps the legal entity itself.
Because the assets are itemized, an asset purchase agreement lists exactly what transfers and what does not. Real estate, if it is part of the transaction, is usually handled through a separate purchase contract even when both close at the same time.
Most small-business transactions in our region are structured as asset sales.
02
Why It Matters
Structure affects liability. A buyer purchasing assets generally does not assume the seller's past obligations, judgments, or tax history the way a buyer of the entity might, which is one reason buyers and their attorneys often prefer this approach.
Structure also affects taxes for both sides. The way the purchase price is divided among asset classes determines depreciation for the buyer and the character of the seller's gain, so the allocation is negotiated, not assumed.
Some things do not transfer automatically. Leases, licenses, permits, franchise agreements, and key vendor contracts may require landlord or third-party consent — and that consent can control the closing timeline.
03
Common Misconceptions
- "An asset sale means I get the whole business." Only the assets listed in the agreement transfer; anything omitted stays with the seller.
- "Licenses and permits come with the assets." Many must be reissued in the buyer's name, and some involve their own application process.
- "The building is included." Real property is a separate asset with its own contract, title work, and financing.
- "Employees transfer automatically." In an asset sale, employees are typically terminated by the seller and rehired by the buyer.
04
Questions to Ask
- Exactly which assets are included, and which are excluded?
- Which liabilities, if any, is the buyer assuming?
- Do the lease, franchise agreement, or key contracts require consent to assign?
- How will the purchase price be allocated among asset classes?
- Which licenses and permits must be reissued, and how long does that take?
05
Related Reading & Resources
The most successful real estate decisions often involve collaboration between several professionals working toward the same goal. Understanding each person's role helps you ask better questions and make more confident decisions.
06
Other Business Sale Terms
- Stock SaleThe buyer purchases the ownership interest in the entity, and the business continues intact.
- GoodwillThe intangible value of a business beyond its tangible assets — reputation, customers, and earning capacity.
- EBITDAEarnings before interest, taxes, depreciation, and amortization — a common starting point for valuing a business.
- Seller FinancingThe seller carries part of the purchase price as a note, and the buyer repays over time.
- Non-Compete AgreementA negotiated limit on the seller competing against the business they just sold.
- Letter of Intent (LOI)A preliminary outline of the key deal terms before definitive documents are drafted.
Thinking About Buying or Selling a Business?
Whether your transaction involves commercial real estate, business assets, or both, I'd be happy to discuss your goals, help you understand the process, and determine what resources or specialized expertise may be appropriate for your situation.
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