“Leave the gun. Take the cannoli.” Fictional mobster Peter Clemenza delivers this famous line in The Godfather after a drive into the country with the godfather’s driver Pauli. The driver betrayed his boss and Clemenza has just meted out justice.
Take the good stuff. Leave the bad stuff. That’s the main idea behind buying a business via an asset purchase. Here are a few pointers so you won’t find yourself pursued by the Seller’s unpaid taxes and liens.
What’s an asset purchase?
There are innumerable ways to structure the purchase of a business, but most deals are either asset purchases or equity purchases. In an equity purchase, the buyer purchases the equity of a company (often referred to as the “target”) from its equity holders — stock in the case of a corporation and membership interests in the case of a limited liability company. The buyer ends up with the entire company, along with all of its assets and all of its liabilities. In a deal structured as an asset purchase, on the other hand, the buyer purchases the company’s assets but leaves the corporate entity behind, along with some or all of the company’s liabilities.
