Difference Between Asset Sale And Stock Sale For Llc In Utah
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The sale of a business usually is not a sale of one asset. Instead, all the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. A business usually has many assets.
Disadvantages of Asset Sale The seller is subject to a double layer of taxation. Transferring assets may be more complicated. Agreements tied to certain assets may need to be renegotiated.
The short answer is that a stock sale is better for you, the seller, while the buyer benefits from an asset sale. But, since we're talking about the IRS, there are infinite variations and complications. As such, you will want to get professional tax and legal advice before proceeding.
If your business is a corporation, the buyer and seller must decide together whether to structure the deal as an asset or stock sale. While an LLC does not have stock, it is possible to transfer ownership of the LLC interest; similar to a stock sale.
Asset sales typically permit buyers to receive depreciation benefits sooner than they would with an entity. On the other hand, as a seller you'll likely come out better from a tax standpoint by selling the entity, because you'll be taxed at the low long-term capital gain rate.
What is an asset sale? An asset sale happens when you sell or transfer the assets of your company, rather than shares or stock. These assets can be tangible (eg machinery and inventory) or intangible (eg intellectual property).
In an asset sale, the ownership of these acquired assets would change hands, with the buyer negotiating separately for each asset. In a stock sale, ownership of such assets does not change hands in the same way. The target still retains its ownership typically, even if the target has a new owner.
