Which structure will a buyer push for?

Almost always an asset sale. It lets them leave behind unknown liabilities and gives them a stepped-up basis in the assets they buy, which is worth real money to them in future depreciation and amortisation.

Why do sellers prefer a stock sale?

It is generally simpler — the entity transfers with its contracts and licences intact — and the proceeds are more likely to be taxed as capital gain rather than including ordinary income components. The difference in what you keep can be substantial.

What derails deals most often?

Diligence findings rather than price. Missing IP assignments, an inaccurate cap table, unfiled tax returns including historic Form 5472 filings, and loss of good standing in a state where the company is registered.

Scaling, fundraising and exiting a US company

Guide · 1 min read

Selling a US company: asset sale vs stock sale

The structure decides how much of the price you keep. It is negotiated, and both sides know exactly what they are asking for.

The short answer

In an asset sale the buyer purchases selected assets and chooses which liabilities to assume, receiving a stepped-up basis. In a stock sale the buyer acquires the entity with its liabilities. Buyers usually prefer asset sales; sellers usually prefer stock sales, which are typically simpler and more likely to be taxed as capital gain.

	Asset sale	Stock sale
Buyer prefers	Usually	Less often
Seller prefers	Less often	Usually
Liabilities	Buyer selects which to assume	Transfer with the company
Basis for buyer	Stepped up	Carryover
Tax to seller	Can include ordinary income components	More typically capital gain
Contracts and licences	Assigned individually — consents may be needed	Generally stay with the entity
Complexity	Higher	Lower

A general characterisation. Outcomes depend on entity type, holding period and the specific assets — model with an adviser before agreeing a structure.

What diligence actually checks

Almost none of it concerns the product. It concerns whether the company owns what it claims and filed what it should.

Cap table accuracy — every issuance documented, every 83(b) filed with proof.
IP assignment from every founder, employee and contractor. The most common defect by a distance.
Tax filings complete, including Form 5472 for any foreign-owned entity in the history.
Good standing in every state where the company is registered.
Clean books, ideally accrual.
Customer contracts signed by people authorised to sign them.

Frequently asked questions

Which structure will a buyer push for?: Almost always an asset sale. It lets them leave behind unknown liabilities and gives them a stepped-up basis in the assets they buy, which is worth real money to them in future depreciation and amortisation.
Why do sellers prefer a stock sale?: It is generally simpler — the entity transfers with its contracts and licences intact — and the proceeds are more likely to be taxed as capital gain rather than including ordinary income components. The difference in what you keep can be substantial.
What derails deals most often?: Diligence findings rather than price. Missing IP assignments, an inaccurate cap table, unfiled tax returns including historic Form 5472 filings, and loss of good standing in a state where the company is registered.

Sources

IRS — Sale of a business

Last reviewed August 23, 2026. Verify against the primary source before acting.

Founders 8 does not provide tax advice. Tax residency depends on facts and rules specific to each jurisdiction — review your position with a qualified adviser.

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