Asset sale
A transaction in which the buyer purchases specified assets and assumes specified liabilities, rather than buying the legal entity itself.
Also called: Asset purchase
In an asset sale the company remains the seller's; what changes hands is a defined list — equipment, inventory, receivables, customer relationships, intellectual property, goodwill — together with an explicit list of assumed liabilities. Anything not on the lists stays behind with the seller and their entity.
Buyers prefer this structure for two reasons. It limits exposure to unknown historical liabilities, since obligations that are not assumed generally remain the seller's. And in many jurisdictions it gives the buyer a stepped-up tax basis in the acquired assets, producing depreciation and amortisation deductions that a share purchase would not.
The costs land on the seller. The proceeds may be taxed less favourably than a share sale, and in some jurisdictions the difference is substantial. There is also more administrative friction: contracts, leases, licences, and permits often need consent to assign, and each consent is a third party who can delay closing or extract something. Employees typically have to be terminated and rehired, which raises accrual, notice, and continuity questions.
Where sellers get caught
- Assuming an asset sale automatically protects the buyer from all successor liability — some categories, including certain tax and employment obligations, can follow the assets.
- Leaving assignment consents to the final week. Landlords and key customers know exactly how much leverage they have then.
- Agreeing a purchase price allocation without modelling the tax consequence for each asset class.
Common questions
Which structure is more common in small-company deals?
Asset sales are very common at the smaller end, because buyers and their lenders want the liability protection and the basis step-up. Larger transactions more often use share purchases.
Can we split the difference on the tax cost?
Frequently, yes. Where the buyer gains materially from the structure and the seller loses, the gap gets negotiated into the price or the allocation. Both sides need their own tax advice to know what the gap actually is.
Related terms
Stock sale
A transaction in which the buyer purchases the shares of the company itself, acquiring the entity together with all of its assets and liabilities.
Purchase price allocation
The agreed split of an asset-sale price across asset classes, which drives the tax outcome for both sides.
Due diligence
The buyer's post-LOI investigation of the business, covering financial, legal, commercial, tax, and operational matters.
Representations and warranties
Statements of fact about the business made by the seller in the purchase agreement, which the buyer relies on and can claim against if untrue.
Guides that use this term
Where asset sale comes up in a real sale, and what it changes.
Last reviewed 2026-08-25. General information for business owners, not legal, tax, or financial advice — terms, thresholds, and tax treatment vary by jurisdiction and by deal.