When buying an existing business, you generally have two options: an asset purchase or a stock purchase. An asset purchase agreement (APA) allows you to buy certain assets, whether they're tangible — such as real estate or equipment — or intangible, like intellectual property. While you should discuss this process with a business lawyer, you can learn more about its benefits in the guide below.

What Are the Advantages of Asset Purchase Agreements?

1. Tax Benefits

The tax implications of an asset purchase agreement tend to favor the buyer. When assets are sold, the seller must pay taxes on any gains from the sale.

However, the buyer can immediately designate the market values to the assets. Then, they can claim deductions on the depreciation of those assets, such as normal wear and tear on machinery, resulting in a lower tax bill. 

2. Fewer Liabilities

In a stock purchase, the buyer receives shares of a company in return for their investment. Unless the company has gone public, you as the buyer may not have insight into all the liabilities that the company faces. 

In an asset purchase agreement, you can pick and choose the assets and any accompanying liabilities involved in the sale. That also means less due diligence is required to be undertaken by your business lawyer. 

3. Easier Transactions

A business lawyer would likely advise you to go ahead with an asset purchase because it tends to be simpler for two reasons. The first reason is that you can potentially sidestep minority shareholders. In stock purchases, minority shareholders can act as obstacles; in asset purchases, you may have an easier time completing the sale. The other reason is that you may not have to comply with as many federal and state securities laws and regulations because the parties are normally exempt from them.

Explore the other benefits of asset purchase agreements with the attorneys at The Law Office of W. Randall Holcomb. They provide commercial, state, and general litigation to clients in Greensboro, NC, and the surrounding areas. Attorney W. Randall Holcomb and the experienced staff offer a detail-oriented approach. Call (336) 888-8760 to schedule a consultation, or visit their website to learn more about the firm.