We were looking at a business and the seller said that they wanted a stock deal versus a asset deal. Does anyone know the difference?

My understanding is that a stock deal you sell everything with an asset deal the buyer decides which assets they want to buy. Generally an asset deal is better for the buyer because they can avoid some liability or assets that they otherwise would of received if they did a stock deal

I hope these definitions help

Stock Purchase
Initially, it should be noted that when we discuss a Stock Purchase we are really referring to the purchase of the entire entity which most often involves a corporation's stock. To the extent that the transaction involves another type of entity such as a Partnership or a Limited Liability Company, the term that is used will be slightly different. In a Stock Purchase, all of the outstanding shares of stock of the business are transferred from the seller to the buyer. Although there may be cases where a party to a contract with the business has a right to object, the buyer in effect steps into the shoes of the seller, and the operation of the business continues in an uninterrupted manner. Unless specifically agreed to, the seller has no continuing interest in, or obligation with respect to, the assets, liabilities or operations of the business.

From an accounting perspective, the business's assets and liabilities are not adjusted, they continue to be carried and/or depreciated in the same manner as before the transaction. From a tax perspective, the seller recognizes a gain or loss based on the difference between the sales price and his or her current basis in the stock.

Asset Purchase
In an Asset Purchase, the seller retains ownership of the shares of stock of the business. The buyer must either create a new entity or use another existing entity for the transaction. Only assets and liabilities which are specifically identified in the purchase agreement are transferred to the buyer. All of the other assets and liabilities remain with the existing business and thereby the seller. Asset Purchase transactions are generally more complicated because ownership of the assets and liabilities and any related contracts must actually be transferred, sometimes through the filing of documents with governmental offices. This may also involve additional fees. In addition, a transaction involving the sale of substantially all of the assets of a business may be impacted by state "Bulk Sales" rules which can require notification of all of the creditors of a business. Other considerations include the possible transfer of the corporate name, and the rehiring of employees by the buying entity.

From an accounting perspective, the buyer records the assets and liabilities at the fair market value assigned to them as part of the transaction. This may increase or decrease the carrying value and/or amount of annual depreciation with respect to individual assets and liabilities. From a tax perspective, the existing business recognizes a gain or loss based on the difference between the sales price and the carrying value of the assets and liabilities.

Thanks CCC that information was helpful.

An asset deal is the way to go as a buyer but alot of sellers want stock deals

I agree generally with the comments that it is better for asset deal for a buyer but each case is different and generally it is a lot more difficult and expensive doing an asset deal because of the schedules that have to be created and some of the complexities of the law