Hi, I'm Meghan. Here's a brief illustration of asset sales and stock sales. What I've got here is really an illustration of a company. On the left side, their balance sheet items include cash, receivables, equipment, some payables, and debt. On the right side, there are off-balance sheet items such as bank accounts, tax accounts with the government, goodwill agreements, customer lists, recipes, and anything else involved in the company. Down here, I've included a future lawsuit, something that you, as a business owner, may not know about, and the buyer doesn't know about it either. But it's sitting out there, and someday it's going to happen. On the other side, we have a buyer. In a stock sale, what happens is the buyer pays money to the business owner for ownership. There might be a stock certificate that comes over, and now the ownership slides right over. So everything in the company moves over except for some excluded items. Often, debt might stay, and there might be some excess cash that is excluded as well. But the real key here is that future liabilities also move over. They can try to be excluded in agreements, but basically, if someone sues, they're going to sue the original entity, and it's going to come right to the new owner. That's what owners don't like about stock sales. Now let's look at an asset sale. In an asset sale, the flow of money is different. The buyer sets up another company and funds that company. Then, that company buys certain assets from the original company. Receivables, inventory, plant equipment, and other assets might get bought and moved over. A lot of the off-balance sheet stuff also gets moved over. Payables may get moved over as well, but some things get left behind. Often, debt...
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Stock acquisition Form: What You Should Know
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