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What to know about acquiring a company

| Jun 21, 2018 | Buying & Selling Businesses |

When buying an existing company in North Carolina, it is important to properly structure the deal. One way to do so is through an asset purchase. In such a scenario, a buyer could purchase all the assets a company owns. It is also possible to purchase specific assets such as a trademark, a certain division of the business or whatever makes sense to the buyer. As a general rule, the buyer assumes all the liabilities that come with the assets purchased.

Instead of buying assets, an individual or company could purchase another company’s stock. This can provide tax advantages for the seller as there is only one level of taxation. However, the buyer does not get a step-up in basis. Unfortunately, this could lead to larger tax bills in the future. Furthermore, this strategy works best when there are a limited number of owners to buy from.

Mergers are the final common method by which a company can be acquired. These deals may either be considered an asset or stock acquisition from a tax perspective. While direct mergers involve two companies joining their assets and liabilities together, an indirect merger sees a company join with a subsidiary. Doing so allows a buyer to keep the company’s assets separate from others that it may have.

Ideally, those engaging in business transactions will do so with the help of an attorney. Legal counsel could help structure the sale in a manner that is favorable to all parties. A buyer could then acquire assets in a tax-efficient manner while also keeping liability to a minimum. Legal counsel may also be able to represent an individual in court or before government regulators if there are challenges to a merger or purchase deal before closing.

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