When it comes to selling a business, one of the first and most important decisions is the structure of the sale, that is specifically, whether it will be a share sale or a business asset sale.
While both options result in the transfer of ownership, they are fundamentally different in terms of legal structure, risk, tax treatment, and complexity.
Understanding the distinction can help you, as a business owner, choose the most suitable path and avoid potential pitfalls.
What Is a Share Sale?
In a share sale, the buyer purchases shares in the company that owns the business. This means they acquire the entire legal entity including its assets, liabilities, contracts, employees, and trading history.
Key features:
- The legal entity (e.g., company) remains the same.
- All business assets and obligations stay within the company.
- Often simpler for operational continuity (contracts and staff remain in place).
- The buyer inherits any risks or liabilities—known or unknown—within the company.
What Is a Business Asset Sale?
In a business asset sale, the buyer purchases selected assets of the business (such as equipment, stock, intellectual property, contracts, and goodwill), but not the company itself.
Key features:
- The seller retains the legal entity; only assets are transferred.
- The buyer can choose which assets and liabilities to acquire.
- Contracts, leases, and employee arrangements may need to be renegotiated or transferred.
- Often more complex to execute but gives the buyer more control over what they’re acquiring.
Key Differences at a Glance
| Aspect |
Share Sale |
Asset Sale |
| Ownership |
Shares in the company |
Specific business assets |
| Legal Entity |
Remains unchanged |
Buyer may operate through a new entity |
| Liabilities |
Buyer inherits all liabilities |
Buyer can exclude certain liabilities |
| Employees |
Typically stay employed under the same entity |
May require new contracts or termination |
| Contracts & Leases |
Often continue unchanged |
May need landlord or client consent |
| Tax Treatment |
May attract CGT; simpler for some concessions |
Different implications for GST and CGT |
Why might you choose one over the other?
The choice between a share sale and an asset sale depends on a variety of factors:
- Seller Perspective
Sellers often prefer a share sale because it results in a cleaner exit. They offload all business liabilities and may benefit from CGT small business concessions or other tax advantages.
- Buyer Perspective
Buyers often prefer an asset sale to avoid inheriting unknown liabilities and to hand-pick the assets they want. However, this can mean more complexity and cost during the transaction.
- Legal and Tax Implications
Share sales are typically simpler in terms of ongoing contracts and staff retention. Asset sales, on the other hand, can trigger transfer duties, GST, and require additional negotiation of leases, supplier agreements, and licenses.
How can a Moore advisor help
If you’re unsure which path to take, our team can help you weigh up your options and choose the structure that best supports your goals. The right sale structure is critical not just for the deal itself, but for your post-sale tax position, legal obligations, and peace of mind.
Getting professional advice early on will help you understand the implications of each option.