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If you have a client that is considering the sale of a corporation or a business, there are certain tax and non-tax issues that should be considered prior to advising the client on how to structure the deal.
Advantages of Stock Sale
There are a number of advantages, from the seller's perspective, in structuring a transaction such as a stock sale as opposed to sale of assets. Generally, the seller benefits from the following:
Disadvantages of a Stock Sale
There are certain disadvantages to the seller when selling stock. Such can include:
Advantages of an Asset Sale
Some of the advantages from the seller's perspective when selling assets can include:
Disadvantages of an Asset Sale
There are certain disadvantages to the seller when selling assets. These disadvantages can include the following:
It is important to recognize that these advantages and disadvantages from the seller's perspective apply when representing the purchaser. While the issues discussed above are germane to any type of business transaction when a client desires to sell (or a purchaser desires to acquire) a business from another entity, every situation presents its own issues and difficulties. If you have a client that wants to sell or purchase another business, it is critical to staff the transaction early in the game with appropriate non-legal and legal professionals and advisors.
Such non-legal professionals and advisors can include certified public accountants, financial advisors, business brokers and insurance agents. The legal teams need to include, as applicable, individuals with experience and expertise in the following areas: real estate, labor and employment, tax, securities, antitrust/Hart-Scott-Rodino, environmental, intellectual property, regulatory, ERISA and employee benefits and litigation.
Seeing the transaction through the due diligence phase to closing can be made easier by considering some of the tax and non-tax issues discussed herein. In addition, pulling together the non-legal and legal professional team in the infancy of the transaction can certainly mitigate and even eliminate certain issues throughout the entire negotiating, document drafting and closing process.
About the Author
Mr. McLaughlin is an associate with the Jackson, Mississippi office of Balch & Bingham LLP where he focuses his practice on advising emerging businesses and existing companies on federal and state financing incentives as well as representing clients in mergers and acquisitions. Mr. McLaughlin is admitted to practice in the State of Mississippi and is a member of the American Bar Association Sections of Business Law, Taxation and Real Property, Probate and Trust Law.