There are many ways to sell a business. The most popular are using Asset
Purchase process or stock purchase process. The first involves selling the
assets of the business as opposed to the entity that houses the business
(i.e. Corporation or partnership). The second involves selling the stock
or ownership interest in the entity housing the business.
With respect to the asset purchase, this is used if the business plans on
either continuing a portion of the current business model or if the
business has certain liabilities the new owner does wish to take on. The
asset purchase would transfer just the portion of the business sought by
the buyer leaving the remaining aspects with the seller. Assets of the
business could be equipment or land but it could also be intangible such as
client lists, use of the business name, and licenses.
With respect to the ownership purchase, this is used to take over the
entity and everything the entity owns. The process is much simpler as the
buyer simply takes the place of the seller. There is little need to
undertake major transfers or any significant transition as the business can
continue in the same format and structure so long as the buyer wishes it to
Keep in mind:
It is best for the buyer to always request a non-compete from
the seller to ensure the buyer is protected from the seller attempting to
compete with the buyer after the business transfer takes place regardless
of the process taken to divest.
Also, a seller should always request the buyer sign a non-disclosure
agreement prior to the due diligence period occurring so as to protect the
If you are not sure where to start, give us a call. We can discuss your options and develop an action plan to ensure you are on the right side of the law.