An asset sale is the purchase of the individual assets of a business, whereas a stock sale is the purchase of the owning entity (the shares) of the business. While there are many factors to consider when selecting a transaction type, potential liability and tax implications are generally the primary concerns.
In an asset sale, the Seller retains possession of the legal entity and the Buyer purchases only the individual assets of the company, such as equipment, fixtures, leaseholds, licenses, goodwill, trade secrets, trade names, domain names, telephone numbers, and inventory. Asset sales generally do not include the cash or accounts receivable and the Seller typically retains any long-term debt obligations. Sellers typically dissolve the legal entity after completion of the sale.
In a stock sale, the Buyer purchases the Seller’s stock, thereby obtaining ownership of the legal entity and the assets it owns. The actual assets acquired in a stock sale tend to be the same as those acquired in an asset sale. Assets and liabilities that aren't part of the transaction are often distributed or paid off prior to the sale. Unlike an asset sale, stock sales do not require bulk transfers of assets, because the title of each asset lies with the acquired company.