Share Sale vs Asset Sale: What is the Difference and Why does it Matter?

When buying or selling a business, one of the first strategic decisions is whether to structure the deal as a share sale or an asset sale. Though both achieve a transfer of ownership of a business/assets, they each come with very different legal, tax, and risk implications.

Two Common Structures in Business Sales

• Asset Sale: The buyer purchases specific business assets and may assume certain liabilities.

• Share Sale: The buyer acquires shares in the company, gaining control of the entire business entity.

What Happens in a Share Sale?

A share sale involves purchasing all or part of the shares in a company. This means the company itself continues operating as is — retaining its assets, liabilities, employees, and contractual relationships.

Why sellers often prefer this structure:

• A clean exit from both the business and its obligations.

• No need to transfer individual contracts or leases.

• Possible eligibility for capital gains tax (CGT) concessions.

What buyers need to consider:

• They inherit all liabilities (including hidden or contingent ones).

• Robust due diligence is essential.

• Legal protections via warranties and indemnities are critical.

  
  

What Happens in an Asset Sale?

In an asset sale, only specific parts of the business (e.g. equipment, IP, stock, goodwill) are transferred — not the company itself. The buyer can pick and choose what they want to acquire, while the seller retains everything else unless explicitly transferred.

Advantages for buyers:

• Avoids inheriting unwanted liabilities.

• Flexibility to restructure or consolidate assets.

• Clearer scope of what’s being acquired.

Challenges for sellers:

They may be left holding residual obligations or assets.

Contractual consents may be required (e.g. for leases, licenses).

More complex when transferring staff or operational relationships.

Legal and Tax Considerations

The structure you choose can have material consequences:

• Share sales may allow access to small business CGT concessions, while asset sales might trigger double taxation (company level and shareholder level).

• Contracts and Licenses: Asset sales may require third-party approvals.

• Employees: Transferring employees in asset deals may involve terminating and rehiring staff.

• Stamp Duty: Rules vary across states and may apply differently depending on the sale structure.

Which Structure Is Best?

There’s no universal answer. The right approach depends on:

• Business size and structure.

• Appetite for risk- Tax strategy.

• Desired continuity or change.

• Negotiation leverage.

LLGOLD Tip: Early legal and tax advice can prevent costly mistakes later. The right structure not only ensures a smoother transaction but can also preserve value, reduce risk, and support future growth.