Two offers can carry the same headline number and leave you with very different checks. The gap is rarely the price. It is the structure of the deal, and most owners don’t look at it until their advisor brings it up, often after the letter of intent is already signed.
Buyers and their advisors ask a different first question: are we buying the company, or are we buying its assets? Your answer determines how much tax you owe, which liabilities move to the buyer, and whether the tax benefits you spent years building survive the closing.
You need to understand the structure before you negotiate anything else. The sections below cover what to check and what to push for.
1. Know Which Deal You Are Actually Signing
Stock sale: The buyer acquires your shares or membership interests. The entity, its contracts, its permits, and its history all stay intact.
Asset sale: The buyer forms a new entity and purchases specific pieces, such as equipment, inventory, customer lists, and goodwill. You keep the legal entity, and the buyer takes only what the agreement names.
Which one is common: Most small-business sales are structured as asset sales, according to BizBuySell’s learning center. In larger private deals the pattern reverses. The American Bar Association’s 2025 Private Target Deal Points Study found that asset deals made up just 21% of 139 agreements, with the rest being stock purchases or mergers.
The practical hurdle: An asset sale means reassigning every lease, contract, permit, and license to the buyer. Each one may need consent or a new agreement, so inventory them early. A missed lease can stall a closing faster than any tax question.
2. Check Your Entity Type Before Anyone Else Does
Your entity type decides the first tax question, and it decides it before the buyer’s preferences come into play.
C corporation, asset sale: The company pays corporate tax on the gain, and shareholders pay tax again when the proceeds reach them. This double layer is the most expensive outcome in the exit market.
C corporation, stock sale: Shareholders pay capital gains tax on the difference between the sale price and their basis in the stock. The entity-level tax disappears.
S corporation or partnership: Gains generally pass through to the owners’ personal returns, so double taxation usually isn’t the issue.
Converted C corporation: If you switched from C to S status recently, built-in gains tax can still apply to appreciated assets sold within five years of the conversion.
If you are a C corporation, this is the first conversation to have with your CPA. It tells you whether an asset sale is a discount you can afford to accept.
3. Understand What the Buyer Is Paying For
Buyers push for assets for reasons with real money attached. Knowing those reasons gives you leverage.
Step-up in basis: In an asset purchase, the buyer’s tax basis resets to the purchase price. That creates depreciation on equipment and amortization on goodwill over 15 years. A stock buyer inherits your existing basis instead.
Liability control: An asset purchase lets the buyer leave behind obligations it did not agree to assume, including unknown claims tied to the entity’s history.
Equipment economics: IRS guidance describes a permanent 100% first-year deduction for qualified property acquired after January 19, 2025. That makes equipment-heavy asset deals more attractive to buyers.
Your leverage: Because the buyer gains tax value, asset deals often command a premium. Foley’s M&A team notes that studies show asset deals tend to be priced above stock deals, and that buyers may pay more to get an asset purchase. Ask for that premium in writing, inside the letter of intent.
4. Negotiate the Allocation Before You Sign
The purchase price allocation is where asset deals are won or lost, and most owners treat it as paperwork. It isn’t.
Seven classes, residual method: Under Section 1060, the purchase price is divided among seven asset classes. Goodwill, Class VII, absorbs whatever value remains after the first six classes are filled.
Both sides file: The buyer and seller each file Form 8594, and both must report the same allocation. Settle the numbers in the purchase agreement, not at tax time when neither side has leverage.
Ordinary income versus capital gains: Value assigned to inventory or to depreciated equipment can be taxed at ordinary rates. Value assigned to other assets can carry capital gains treatment. Every line on the allocation schedule has a tax character, so model each one.
Earnouts need follow-up: If part of the price depends on future performance, later payments may require supplemental Form 8594 filings in the years they are paid. Plan for that paperwork before you agree to the earnout.
5. Ask Whether a Stock Deal Is Still on the Table
Sometimes a buyer wants the tax benefits of an asset deal without the operational hassle of an asset purchase. Ask whether both sides can get what they need.
Section 338(h)(10) and 336(e) elections: These let a stock purchase be treated as an asset sale for tax purposes. On an S corporation, shareholders often owe more under the deemed asset sale, so expect the buyer to pay for that privilege.
Section 1202 exclusion: Qualified small business stock issued by a C corporation may let you exclude a large part of your gain. For stock acquired after July 4, 2025, the exclusion is 50% after three years, 75% after four, and 100% after five. It is capped at the greater of $15 million per issuer or 10 times your basis.
Qualification is fact-specific: The stock generally must be acquired at original issuance, and the company’s history matters. Confirm eligibility with your CPA before you negotiate, not after you have already agreed on a number.
Final Thoughts
The price is the headline. The structure decides what you keep. Ask for the after-tax number for every structure on the table before you accept an offer, not after you have already shaken hands and told your family.
Before you accept any offer, book a discovery call and we will model the after-tax proceeds for each structure with you: Book a discovery call