What is the difference between a share sale and an asset sale?
Short Answer
In a share sale the buyer acquires the company itself, including its liabilities; in an asset sale the buyer acquires specified assets and leaves most liabilities behind. The choice has major tax and risk consequences.
Full Explanation
Share sales and asset sales transfer a business in fundamentally different ways, and the choice affects price, tax and risk for both sides.
In a share sale, the buyer purchases the shares in the company, taking on the business as a whole — its contracts, employees, assets and liabilities, including hidden ones. Sellers usually prefer share sales because they achieve a clean break and, in the UK, may qualify for Business Asset Disposal Relief on the gain. Buyers accept more risk and so demand fuller warranties and indemnities.
In an asset sale, the buyer picks specific assets and liabilities and leaves the rest, including many historic risks, with the seller's company. Buyers often prefer this for the control and the ability to claim capital allowances on the assets acquired; sellers may face a less favourable tax outcome, sometimes a double tax charge if proceeds are then extracted from the company.
Because structure drives the after-tax result, take UK tax advice early. See share sale vs asset sale and Business Asset Disposal Relief.
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