When you sell a business, the deal is typically either an asset sale or a stock sale (for an LLC, a membership interest sale). The structure affects taxes, liabilities, contracts and licensing, so it's worth understanding before you negotiate.
Asset sale
The buyer buys specific assets of the business, like equipment, vehicles, inventory, customer lists, phone numbers, website and goodwill, and usually takes on only specific liabilities. Your company entity stays with you, along with liabilities not assumed.
- Buyers often prefer asset sales because they limit exposure to unknown past liabilities and can provide tax benefits through depreciation of purchased assets.
- Contracts, leases and some licenses may need to be assigned or reissued.
Stock or membership interest sale
The buyer buys your ownership of the company. The entity, with its contracts, history and liabilities, continues under new owners.
- Contracts, accounts and registrations generally stay in place, though some contracts have change-of-control clauses.
- Buyers take on the company's history, so they typically ask for broader representations and indemnities.
- Sellers often prefer stock sales for tax reasons, depending on entity type.
Taxes
How the price is allocated across assets in an asset sale affects how much is taxed as capital gain vs. ordinary income. Entity type (C corp, S corp, LLC) matters too. This is an area where your CPA earns their fee.
Licensing
For Florida contractors, a qualifier plan is needed either way. See Florida license transfer when selling.
Which is right?
It depends on your entity, contracts, tax situation and the buyer. We are flexible and will explain trade-offs plainly, but always get your own legal and tax advice.
This guide is general information, not legal, tax or financial advice. Consult your own attorney and CPA.