What is the main advantage of an asset purchase over a stock purchase?

The buyer can select specific assets and liabilities to assume, generally leaving the seller's undisclosed or excluded liabilities behind, which reduces the buyer's exposure to the target's prior history.

Can I still be sued for the seller's old debts after an asset purchase?

In limited circumstances, yes. Certain successor liability doctrines can attach specific categories of liability to the buyer regardless of contract language, which is why diligence and targeted indemnification remain important even in an asset deal.

How is the purchase price allocated among the assets?

The parties negotiate an allocation across categories such as equipment, inventory, goodwill and covenants not to compete, generally reporting it consistently for tax purposes. The allocation affects the buyer's future depreciation and the seller's character of gain.

Do I need the landlord's consent to take over the lease as part of an asset purchase?

Generally yes, unless the buyer is signing a new lease directly with the landlord. Most commercial leases require landlord consent for an assignment, and this should be confirmed early in the transaction.

What happens to the seller's employees in an asset purchase?

The buyer is generally not obligated to retain the seller's employees unless required by a specific agreement or statute, but the purchase agreement should clearly address offers of employment, accrued wages and benefit obligations to avoid ambiguity.

Asset Purchase Agreement Attorney

Drafting and negotiation of asset purchase agreements for business acquisitions.

Structuring what is bought and what is left behind

An asset purchase agreement identifies precisely which assets transfer (equipment, inventory, contracts, intellectual property, goodwill) and which liabilities the buyer assumes. Anything not expressly assumed generally remains with the seller, which is the core appeal of this structure for buyers.

Purchase price allocation

The purchase price is allocated among asset categories for tax purposes, affecting depreciation for the buyer and the character of gain for the seller. Both parties generally report the allocation consistently to the IRS, so it should be negotiated and fixed in the agreement rather than left ambiguous.

Successor liability is not always avoidable by structure alone

While an asset purchase can limit the buyer's exposure to the seller's general liabilities, certain claims (including some product liability, environmental, tax and bulk-transfer exposures) can follow the assets under specific legal doctrines regardless of how the deal is papered. Diligence and targeted indemnification address what the structure alone cannot.

Assignability of contracts, leases and licenses

Many key contracts and leases require the counterparty's consent before assignment to the buyer.
Government licenses and permits, such as liquor licenses, often cannot transfer automatically and require a separate application process.
Employee-related matters (offers of employment, benefit continuity and accrued liabilities) should be addressed expressly.

Process

1
Identify assets and liabilities
Define precisely what transfers and what is excluded.
2
Allocate price
Negotiate the tax allocation among asset categories.
3
Secure consents
Obtain landlord, lender and licensor consents needed to transfer key contracts and permits.
4
Close
Execute bills of sale, assignment agreements and closing deliverables.

Answers

Frequently asked questions

What is the main advantage of an asset purchase over a stock purchase?: The buyer can select specific assets and liabilities to assume, generally leaving the seller's undisclosed or excluded liabilities behind, which reduces the buyer's exposure to the target's prior history.
Can I still be sued for the seller's old debts after an asset purchase?: In limited circumstances, yes. Certain successor liability doctrines can attach specific categories of liability to the buyer regardless of contract language, which is why diligence and targeted indemnification remain important even in an asset deal.
How is the purchase price allocated among the assets?: The parties negotiate an allocation across categories such as equipment, inventory, goodwill and covenants not to compete, generally reporting it consistently for tax purposes. The allocation affects the buyer's future depreciation and the seller's character of gain.
Do I need the landlord's consent to take over the lease as part of an asset purchase?: Generally yes, unless the buyer is signing a new lease directly with the landlord. Most commercial leases require landlord consent for an assignment, and this should be confirmed early in the transaction.
What happens to the seller's employees in an asset purchase?: The buyer is generally not obligated to retain the seller's employees unless required by a specific agreement or statute, but the purchase agreement should clearly address offers of employment, accrued wages and benefit obligations to avoid ambiguity.

Official sources

Consult the official sources above for current rules and procedures.

Asset Purchase Agreements