ASSET PURCHASE AGREEMENT


ASSET PURCHASE AGREEMENT

An asset purchase agreement is an agreement involving and finalizing all the terms and conditions related to the purchase and sale of a company’s assets.  Through an asset sale, the buyer only obtains the tangible or intangible assets of a company, but not the legal entity or the liabilities of the business.  Moreover, in an asset sale, the buyer is not necessarily required to purchase all of the assets of the company, and can obtain only certain valuable assets, bypassing depreciable or high-risk properties that may be subject to future liability.

Sale through an asset sale allows the seller to retain possession of the legal entity, while the purchaser acquires only the assets of the company, such as equipment, fixtures, leaseholds, licenses, goodwill, trade secrets, trade names, telephone numbers, and inventory. Accordingly, the seller tends to retain the long-term obligations of the company.  Moreover, asset sales tend to generate higher taxes for the seller as intangible assets are taxed at capital gains rates and “hard” assets can be subject to higher ordinary income taxes.  On the other hand, a buyer tends to favor an asset sale as they can allocate values for assets based on their depreciation in order to obtain additional tax benefits.

While buyers tend to favor asset sales as such sales allow the buyer to bypass liabilities, certain assets can be difficult to transfer due to issues of legal ownership, assignability, and third-party consents. Such examples include intellectual property, government or corporate contracts, certain leases, and permits.  Moreover, an asset sale might not necessarily include the name of the business, meaning that the seller’s name brand recognition could be lost in the sale. Therefore, it is important for the seller and buyer to consider exactly the type of assets they are seeking to sell or acquire, which will determine the type of sale appropriate.

For more information on asset purchase agreements, please contact Antonoplos & Associates at 202-803-5676 or on the web at www.Antonlegal.com.