Stock Sale vs. Asset Sale
Stock Sale vs. Asset Sale for FedEx Routes
When purchasing a FedEx Ground route business, there are two types of sales to choose from: Asset sale or stock sale. The type of transaction you choose can have major implications on the taxes, liabilities, and overall deal process.
The first thing buyers need to know is that 99% of all of our transactions are done through an asset sale, using an asset purchase agreement (APA). Nearly all business purchases in this space are done through an asset sale as it is the most beneficial for both parties. Stock sales have very few incentives for buyers, but there could be unique cases where a stock sale could work for you and your personal needs.
What Is a Stock Sale?
A stock sale is when you buy the stock of a business. This means when you purchase the stock, you inherit all the known and unknown liabilities. Furthermore, it includes any skeletons of the business that surface after the purchase is complete.
For example, a workers’ compensation claim, a lawsuit, or debt. With a stock sale, you become legally responsible for all those liabilities.
When purchasing the stock of an operation, you will:
Obtain the debt of the company
Use the existing name
Be responsible for any liability
Receive the trucks
Most buyers do not consider a stock purchase agreement due to the taxation that comes with the sale. When a buyer decides to buy the stock of a business, they obtain the vehicles and the balance sheet at what is remaining in their depreciation cycle.
In most cases, a buyer in a stock sale will receive heavily depreciated vehicles or even completely depreciated trucks. This means there is not much value in obtaining the vehicles that come with the purchase.
What Is an Asset Sale?
An asset sale is when a buyer purchases the contract of a business and the trucks, placing them under a different entity. For example, the trucks may be under a leasing contract, but the buyer will have the option to keep the current trucks with the lease or buy trucks to replace the lease.
Unlike a stock sale where you become responsible for all the liabilities, with an asset sale, any liabilities remain with the seller. This means you have a fresh start when you purchase the business and are not legally responsible for previous liabilities before acquiring the operation.
When purchasing an asset sale, you are:
Gaining the opportunity to reset the depreciation of the vehicles
Not responsible for any liabilities prior to the purchase
Not required to keep the name of the operation
Take note that when a buyer does an asset purchase agreement, they can reset the depreciation to the market value or what the buyer is agreeing to in the agreement for the current value of the vehicles.
The best interest of any buyer is to do an asset sale instead of a stock sale. Why? No liabilities and the opportunity to reset the depreciation of the trucks, which can significantly increase the value of your business.
Want to Learn More?
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