You have two choices when you buy a busi­ness. You can either buy the assets (includ­ing trade­marks, copy­rights, lia­bil­i­ties, cus­tomer lists, etc.) or you can buy the stock if it’s a cor­po­ra­tion or the mem­ber­ship inter­est if it’s an LLC. The buyer will more than likely want an asset sale. The advan­tages of buy­ing the assets includes tax advan­tages with depre­ci­a­tion, the abil­ity to exclude unat­trac­tive assets, remov­ing the company’s debts and lia­bil­i­ties from the deal, etc. The main dis­ad­van­tages to an asset sale for a buyer is los­ing valu­able assets such as a lease that can’t be trans­ferred to the new owner. If the buyer and seller agree to an asset sale, they will divide the assets and allo­cate a price to each one. The allo­ca­tion affects depre­ci­a­tion and the cost basis of each asset.

But the seller will typ­i­cally want to sell the entity to pay cap­i­tal gains rates rather than income tax rates. If the seller is a cor­po­ra­tion, the seller will want to avoid the huge hit that comes from dou­ble taxation.

What­ever the par­ties choose to do will affect the price. That’s why this deci­sion will need to be made early.