What the buyer is actually buying
The charter, the tax history, the OSHA log, the environmental file, the union relationship, and every contract that names the entity. That can be a feature on a government-contract shop where novation would be slower than an equity close. It is a bug if the plating line has an unbudgeted recognized environmental condition.
FAR 42.12 still exists for novations when the contractor changes (Source: FAR 42.12). A stock sale can reduce that friction. It does not erase ITAR notice or CFIUS when a foreign person is in the chain.
Diligence that gets heavier, not lighter
Environmental liability travels with the entity. Successor-tax posture still needs counsel. SBA 7(a) can finance a change of ownership inside $5 million, but credit will still ask which liabilities remain (Source: SBA).
Census CBP 2023’s 68.4% under-20 share is why many stock deals are really “we did not want to re-paper the ISO certificate and the key customer” (Source: Census CBP). Write that reason. Do not hide it behind “simpler.”
| Topic | Stock purchase | Asset purchase |
|---|---|---|
| Entity survives | Yes | Usually no (seller keeps shell) |
| Historical liabilities | Stay unless carved | Stay with seller unless assumed |
| Contract assignment | Often unnecessary | Often required |
| Basis in iron | Typically carryover | Step-up is the buyer’s aim |
Why isolate this noun from the APA?
Because sellers say “stock deal” when they mean “I do not want to allocate the presses.” Those are different fights. The glossary splits the contracts. The FAQ holds the question. Jason Taken is a business broker. Educational information only. Counsel drafts; a CPA models the tax.
What extra diligence a stock buyer is paying for
Tax history, including any aggressive positions and any nexus the seller never registered. OSHA 300 logs and open citations. Environmental files that predate the current owner. Employee misclassification. Open customer claims that name the entity. Software that is licensed to the corporation. Bank accounts and UCC filings that do not magically disappear because you liked the certificate.
Representations get longer. Indemnity escrows get more important. Representation-and-warranty insurance, when it is available, still has exclusions for known dirt. None of that is a reason to refuse equity if novation or a license makes an asset sale worse. It is a reason to budget the work.
A 338(h)(10) or similar election can put you back in Form 8594 territory. That is a CPA fork, not a glossary slogan.
When equity really is the cleaner path — or really is not — book a confidential intro call.
What “the entity stays” means for leftover names and liens
The EIN, the operating accounts, the UCC filings, and the insurance policies stay unless you change them. That is convenient. It is also how a forgotten tax lien becomes the buyer’s morning. Run searches. Read the minute book. Read every unused trade name. A forgotten DBA on a 2016 complaint is still a complaint.
A CIM that says “stock deal for simplicity” without naming the leftover searches is selling a slogan. Bring why equity is supposed to be cleaner — a vehicle, a certificate, a license — and the searches you have not run. Convenience is not a reason. Asset sale versus stock sale keeps the fork. Counsel drafts the SPA. A CPA models the tax leftovers. After the noun is straight, a confidential intro call is the conversion path.
What an SPA is not
It is not an asset purchase agreement. It is not a holiday from WARN, environmental statutes, or ITAR notice. It is not automatically free of Form 8594 if a 338(h)(10) or similar election treats the deal as assets. A CIM that says “stock for simplicity” without naming the leftover searches is selling a slogan.
How it shows up: the entity survives, contracts often stay put, and historical liabilities stay inside unless the agreement and the law shift them. That can be a feature on a government-contract shop where novation would be slower than an equity close. It is a bug if the plating line has an unbudgeted REC. Write the reason you chose equity. Do not hide it behind “simpler.” Census CBP 2023’s 68.4% under-20 share is why many stock deals are really “we did not want to re-paper the certificate and the key customer” (Source: Census CBP).