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Buying a business: Shares or assets?

Assuming the target business is operated through a company, there are two ways for you to acquire it:

  1. by buying the shares in the company from its shareholders, or
  2. by buying the assets of the business from the company.

There are several differences between the two:

Assets and liabilities

In a share sale, the buyer buys the target company along with all its assets and liabilities. In an asset sale, you can ‘cherry pick’ the assets you want (if the seller will agree) and leave all liabilities other than employees with the seller. For this reason, buyers often prefer to buy assets rather than shares.

Form of transfer

Shares are transferred by a simple stock transfer form, whereas different assets require different forms of transfer. For example, property requires a transfer or assignment, and customer contracts must be assigned or novated.

Consents and approvals

On an asset sale the assets have to be actually transferred to the buyer and this may require the consent of third parties. For example, customer contracts may not be transferable without the consent of the customer, and the transfer of a leasehold property will require the consent of the landlord.

If you cannot obtain consent for the transfer of a key asset, a share sale may be the only option.

On a share sale, the problem of obtaining consent will only arise if a document entered into by the target company (e.g. a bank loan agreement) contains a ‘change of control’ clause. This clause gives the other party the right to terminate the agreement on a sale of the shares.


On a share sale, you will inherit the target company’s tax liability and will therefore need specific protection from the seller against this. On an asset sale, the tax liabilities of the business normally remain with the seller.

An additional advantage of an asset sale is that you can write off goodwill acquired from the seller against profits you earn in the business over time. Against this, in a share sale, if the target company has significant tax losses, you may be able to make some use of these to set off against profits in your existing business, if you have one.

Stamp duty

On a share sale, you must pay stamp duty at 0.5% of the sale price. On an asset sale, you will have to pay stamp duty land tax of up to 4% of the price of any land being transferred. Generally, stamp duty is no longer payable on the transfer of other assets, such as goodwill, intellectual property or customer contracts.

Sale proceeds

On a share sale, the price is paid directly to the individual shareholders. On a sale of assets by a company, the price is paid to the company, and then, if the shareholders want to receive the money personally, the sale proceeds have to be transferred from the company to the shareholders. This may trigger a double tax charge, first for the selling company and secondly for its shareholders, which may make an asset sale very unattractive to the seller.

The choice for buyers and sellers

Generally speaking, for the reasons given above, buyers tend to prefer to buy assets, whereas sellers prefer to sell shares. The choice will depend on the parties’ respective bargaining strengths and the nature of the business. For example, if the main asset of the business is a property, you may prefer to buy shares, rather than pay stamp duty of up to 4% of the price.

Click here to read the full briefing series: Buying a business.

If you are looking to sell your business, please see our ‘Selling a business’ series.

For more information or guidance, please contact:

Peter Coats
Partner and Head of M&A
T. 020 7227 7441


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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