Asset purchase

What it is

An asset purchase transfers a defined list of assets from the seller’s entity to yours. The seller’s company continues to exist — it simply no longer owns the business it used to run. Everything you are acquiring is named in a schedule, and anything not named stays behind.

That is the whole appeal. A liability the seller incurred before closing generally stays with the entity that incurred it, so you are not buying unknown history along with the equipment.

Why most small-business buyers prefer it

• You choose what you assume. The schedule is the negotiation. If a liability is not on it, you have not agreed to take it.
• The tax basis resets to what you paid, which generally improves your depreciation and amortisation position compared with inheriting the seller’s basis. Model it with your CPA rather than assuming it.
• Lenders are familiar with it and can take clean security over identified assets.

What it costs you in work

Because a new legal owner is operating the business, nothing carries over automatically:

• The sales-tax registration does not transfer. New York states that a Certificate of Authority cannot be transferred or assigned, and a buyer of an existing business must apply for their own — at least 20 days before beginning business.^[3]
• The lease needs assignment and landlord consent, which is routinely the slowest consent in the deal.
• Customer and supplier contracts need assignment, and any of them may contain a consent requirement you have not read.
• Employees are generally terminated by the seller and hired by you, with all that implies for accrued balances and continuity.
• Licences and permits follow their own regimes — several New York licences attach to a person, an entity or a location and simply do not move.

Asset purchase does not mean liability-free

The most expensive misconception in New York small-business acquisition. Buying assets rather than equity does not automatically protect you from the seller’s unpaid sales tax — successor liability can reach the buyer, and the bulk-sale notice process is what prevents it.^[2] Form TP-153 carries the purchaser warning directly.^[2]

Structure is protection against contractual history. It is not blanket protection against statutory successor liability.

How the price gets reported

An asset purchase of a trade or business is an “applicable asset acquisition,” and the IRS instructions state that “generally, both the purchaser and seller must file Form 8594 and attach it to their income tax returns.”^[1] The price is allocated across seven asset classes, with goodwill and going-concern value falling in Class VII.^[1]

Both sides file, and the allocations should agree. Because buyer and seller have opposing tax preferences about where the money lands, negotiate the allocation in the purchase agreement rather than discovering the disagreement at filing time. See purchase price allocation.

The other option

The alternative is an equity purchase, where the entity itself changes hands and its history comes with it. The full comparison — fourteen dimensions, with the New York consequences of each — is in the asset versus equity guide.