EXCLUSIVE: NAI Business Series with Alf Sanderson*, VP Business Advisory
If your business is incorporated, you can sell the corporate shares of your business. Once you sell the shares, the Buyer automatically gains control of the business and all of its assets.
Buyers often prefer asset sales to avoid inheriting potential liability by acquiring the company through a share sale. They may want to avoid potential disputes such as contract claims, product warranty disputes, product liability claims, employment-related lawsuits, and other possible claims.
These potential claims can be mitigated or eliminated by having a lawyer draft a Share Purchase Agreement where the Seller is responsible for all claims pre-closing. There is usually a cash holdback or set-offs against Vendor financing.
In the end, whether the sale of a business transpires by way of a share sale or asset sale may depend on the structure of the company and the Buyer’s wants and needs. The price for the assets may not always equal the price for the company’s shares. An analysis of the Seller’s tax benefits and liabilities passed through to the Buyer will determine what works for both parties. A qualified business broker, accountant and lawyer can explain and investigate the structure and process.
Written by Alf Sanderson*
Vice President Business Broker, Mergers and Acquisitions Consultant
604 691 6646
*Personal Real Estate Corporation
Alf has over forty years of industry experience, building and operating businesses, taking companies public and assisting firms in coordinating and selling their businesses. Contact Alf with your questions regarding the disposition of your business.