Buy The Assets, Not The Business

Most understand the principle behind buying the assets, not the business. Certainly, most lawyers and accountants understand and give appropriate guidance to their clients, however, some small business owners have not gotten the memo and buy the business to their potential peril.

So, here is the info you need to better understand this issue and the reasons why I highly recommend that under most circumstances it is best to buy the assets of a business as opposed to buying the entire business.

Perhaps the most compelling reason is that when buying the assets you leave the liabilities behind. The unsecured creditors cannot make a claim against the assets of the new entity. Any unpaid tax obligations, if not yet liened, will not follow the assets. Lawsuits and any liabilities, known or unknown, will not follow the assets –they are left behind. Thus, prudence dictates that when purchasing a business one should design it as an asset purchase. This will prevent costly mistakes.

In all reality, the business follows the assets so there is really no detriment to the decision to design your acquisition as an asset purchase. You will receive the benefits you are seeking as everything you need will be available to you to continue the operation. If the business is not making a profit there is no technical “goodwill” and thus the business is only worth the value of the assets, so it stands to reason that the best strategy is to only purchase the assets and not the business.

The name of the business is an asset and can be purchased and can remain exactly the same as it was. The telephone numbers are assets, as are the fax number, the website, the customer list, vendor list, etc. Everything necessary to run and continue the business is an asset and available for purchase and such a purchase ensures that you are not inviting the liabilities to join you in your new venture.