Transactions involving an established North Carolina business involves a lot of complex agreements between parties that may not have the exact same interests. In an asset purchase, the buyer purchases all or a certain portion of the company’s assets while taking on certain of its liabilities. This allows the buyer to take on a limited amount of risk while retaining a portion of ownership for the owner.
In a stock purchase, the purchaser buyers all the company’s stock directly from the owner for cash or some other type of agreement. Once the deal is closed, the target company becomes a subsidiary of the purchaser. This type of transaction may be simpler but not as tax efficient for the buyer. For the previous owners of the target company, it may actually be more tax efficient because all earnings would be capital gains.
When two organizations join together into a single legal entity, it’s considered a merger. A direct merger is when either the buyer or target company remains intact after joining. An indirect merger is when the target merges with the subsidiary of the buyer with the subsidiary or target surviving. This type of merger allows the buyer to keep the assets and liabilities separate from the main company.
In each of these three scenarios, parties should have representation from counsel who will represent their financial interests. Buying, selling, or merging a company involves a lot of legal documentation that requires close attention to detail. Each state, as well as the federal government, has rules regarding these processes involving these types of business transactions. Legal professionals can help companies decide which strategy makes the most sense.