Acquisitions

Acquisitions may entail

·        Stock or Membership Interest

·        Asset Acquisition

·        Both of the above

 

Stock or Membership Interest. When shares are acquired, all assets remain in the target company, including its contracts, intellectual property, licenses, permits, and franchises. Few transfer documents are required. Transfer taxes are relatively low or nonexistent. The main disadvantage in a share or membership interest acquisition is that assuming the business is continued, all legal liabilities - past, present and the ones that may appear in the future - are transferred to the new owner. It is possible to negotiate the allocation of liability between the buyer and the seller in the purchase agreement and have the seller agree to indemnify the buyer in case of undisclosed or unforeseen liabilities.

 

Asset Acquisition. In asset acquisition, the purchaser does not buy the company as a whole, but instead selects only the company assets that are of interest. The liabilities stay with the target company, since it is only selling its assets, but the company continues its existence with the previous owners. However, favorable tax attributes, licenses, permits, and contracts of the target company will not pass to the buyer in an asset acquisition. Each asset must be separately investigated and evaluated to make sure it is not subject to attachment by creditors of the seller or has other inherent liabilities.

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