Glossary
Asset purchase vs. stock purchase
In an asset purchase, the buyer acquires specific assets of the business (equipment, inventory, customer lists, name, contracts) and usually leaves most liabilities with the seller's entity. Most small-business acquisitions are structured this way.
In a stock (or share) purchase, the buyer acquires the company itself, including its history, contracts and liabilities, known and unknown. It can be necessary when licenses, contracts or permits cannot be transferred.
The choice affects taxes for both sides, which liabilities you take on, and how contracts and licenses transfer.
The trap: choosing a structure without tax and legal advice. The difference can be worth far more than the cost of the advice.