1400 Gables Ct #103 Plano, TX 75075
5601 Bridge Street, #300, Ft. Worth, TX 76112

Dallas Business Lawyer Discusses Advantages of Making an Asset Purchase

Dallas business law attorney, Richard “Ric” Armstrong, talks about how purchasing assets from another business may enhance your own company.

When a business owner decides to acquire part or all of another company, he can usually do so in one of two ways: by an asset purchase or a stock/share purchase. With the first option, you are buying the actual physical and non-physical assets of the target company—for example, land, vehicles, equipment inventory, customer contracts, IP, etc. With the second, you are essentially “buying in” to the target company itself.

Why Buy Assets Rather than Shares?

Both asset and share sales of a business have their unique pros and cons, depending on the circumstances and the goals of the buyer and seller. However, if you are the buyer, an asset purchase may offer these specific advantages over purchasing shares:

You can acquire the assets and leave the liabilities. With an asset sale, the seller generally assumes responsibility for any company liabilities unless the buyer elects to take them on.

Asset purchases are simpler legally. Share sales can sometimes be subject to complex federal and state securities regulations, or to stock restriction or buy-sell agreements in smaller companies. An asset sale is a simpler transfer of property.

Tax advantages. When buying assets, you may benefit tax-wise from a step-up in basis over the tax values of certain assets. You can also amortize goodwill value (the amount you pay for the company over the value of the assets itself) over a period of 15 years.

Bypass minority shareholders. If the target company has shares, minority shareholders normally can’t prevent an asset purchase, where they may be able to block a share purchase.

Potential Advantages to Your Existing Business

Acquiring strategic assets of another business—especially if it’s related to your existing company—can be very beneficial in several ways. For example, you can improve your output and performance with the equipment and property you purchase without taking responsibility for the legal entity of the target company. If you purchase contracts, you can generate revenue from customer relationships you didn’t have to spend time cultivating. Finally, purchasing assets from a competing business represents a way of effectively neutralizing your competition.

Although asset purchases are simpler in some ways than share purchases, you should never enter a contract for an asset sale without the advice of experienced legal counsel. To get help from a Dallas business law attorney, call Armstrong The Law Firm, P.C., today at 972-424-L-A-W-S (5297).

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Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

Fort Worth Location (By Appointment Only)
5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297