Buying A Business? #1 Thing You Need To Know About Asset V. Stock Purchases

For real estate investors, entrepreneurs, and anyone considering buying a business, understanding the difference between an asset purchase and a stock purchase could save you from legal and financial landmines.

When acquiring a company, the structure of the deal matters—big time. While the opportunity to own an established business can be enticing, how you approach the purchase can have long-lasting implications on risk, liability, and operational freedom. In this article, Greg Dickerson breaks down the crucial difference between two common acquisition structures: buying the assets vs. buying the corporation.

The Risky Reality of a Stock Purchase

When you buy the stock of a company (whether it’s a corporation or LLC), you're stepping into the shoes of the existing owner—liabilities and all. This means you’re not just buying the business’s operations and assets; you're buying everything associated with that company, including unknown or undisclosed issues.

“If you buy the corporation, you're buying everything that goes along with it, including all of the legal issues that could be out there… from either customers, vendors, or other associates, former employees.”

That includes lawsuits, debt, tax issues, warranty claims, or other liabilities that could surface years after the sale is complete. Greg shares a real-world example from his own experience:

He once sold a plumbing company, ensuring proper documentation—including an indemnification agreement and letters to vendors stating he was no longer responsible. Still, a vendor came after him 10 years later due to an old personal guarantee tied to the original business name. Even though the corporation had been dissolved, he had to defend himself with written proof to avoid the liability.

The Safer Path: Asset Purchase Agreements

In contrast, an asset purchase gives you far more control and clarity. With this structure, you’re only buying what you specifically negotiate for:

• Equipment and fixtures

• Customer lists and goodwill

• Intellectual property

• Company name (in some cases)

• Proprietary processes or materials

This means you’re not taking on the hidden baggage of the entire legal entity. According to Greg, this approach is “much cleaner and easier” and allows you to start fresh without worrying about old debts or unexpected claims.

Get Legal Protection—Always

Whether you’re buying the stock or the assets, never proceed without a mergers and acquisitions attorney. Greg emphasizes this point clearly: legal counsel is essential to ensure you conduct proper due diligence. That includes:

• Running lien searches

• Checking for lawsuits or ongoing legal disputes

• Ensuring you’re removed from personal guarantees or corporate records

Even with the best intentions and documentation, legal surprises can and do occur. Having the right protections and people in place upfront is your best defense.

Final Thought: Stick with the Clean Route

Buying a business is a smart move for many entrepreneurs—but only if you protect yourself from unnecessary risks. Greg’s advice is clear:

“You're much better off just buying the assets… and you can move forward much cleaner and easier with less liability.”

The key takeaway? If you’re considering buying an existing business, strongly consider structuring the deal as an asset purchase. It’s not just about what you’re buying—it's about what you avoid inheriting.

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