Selling a business is a process made of many complexities involving people, money, a legacy and, of course, deep emotion. Because of what’s at stake for all parties, it’s often a daunting process. But it doesn’t have to be. Knowing what is included in the sale of a business can help ensure that everything goes smoothly and that both parties are satisfied with the outcome.

The most important part of any business sale transaction is understanding what exactly you are selling, including assets such as equipment, inventory, accounts receivable, intellectual property rights,  and more. Additionally, there may be other items such as contracts with customers or suppliers and agreements between employees which will also need to be taken into consideration during the sale process. By taking the time to understand what is included in the sale of a business before going to market to sell your business, you can get top dollar for your company.

This article will unpack the above , and detail what gets included in the sale price.

The Impact of Asset vs. Stock Sale

There are two main types of business sales: asset sales and stock sales. It is important to understand the differences between these two types of sales as what is included can vary widely.

Stock Sale

In a stock sale, the buyer purchases the entire company, including all assets and liabilities. This means that the buyer assumes ownership of the company and its obligations, including most legal or financial liabilities.

However, many buyers acquire companies on a cash-free, debt-free basis. This means the seller will keep the cash in the business and may be required to turn over the business with all loans either paid off or assumed by the seller.

Another stipulation will be that there must be sufficient Working Capital in the business. We will address this in more detail later in this article.

Asset Sale

In an asset sale, the buyer purchases specific assets and liabilities of the business rather than the entire company. This means that the buyer acquires the assets and liabilities they want and leaves behind those they do not. Assets that can be included in an asset sale include accounts receivable, equipment, inventory, intellectual property, and contracts.

What Is Working Capital?

For both asset and stock sales sufficient Working Capital is expected to be left in the business on the date of transfer of ownership. The accounting definition of working capital is Current Assets – Current Liabilities. HINT: look at your balance sheet to see what is included in each of those categories.

The customary practice for M&A deals rests on the principle that owners of private companies often leave far more cash in the company than necessary (it helps entrepreneurs sleep better). In addition, large business acquirers typically can obtain a lower cost of debt, for lines of credit, than smaller companies. Recognizing this, transactions are typically completed on a cash-free, debt-free basis. Translation, the seller keeps the cash and any bank debt owed on the date of the business transfer.

It is important to note that a Working Capital target will be included in both an asset and stock sale. The purpose of this is to protect the buyer. Since the seller keeps all the cash, the buyer will need sufficient accounts receivable, and inventory to continue to operate the business. The negotiation on how to calculate, and reconcile, working capital on the transaction closing date needs careful attention and should be done by a professional experienced in mergers & acquisitions.

Do I Give Up My Accounts Receivable?

With a stock sale the buyer will acquire all your accounts receivable at the time of business transfer.

In the case of an asset sale the buyer will only want your “good” accounts receivable. That means if they believe some invoices are uncollectable or from a customer, they do not want to keep they can elect to leave these with the seller. The issue for the seller then becomes the fact this will reduce the working capital calculation and may require a purchase price reduction.

Are Equipment, Furniture and Other Business Assets Included in the Sale of a Business?

When selling a business, it is important to know buyers will usually want to acquire your furniture, fixtures and equipment and other business     assets. Depending on the type of business being sold, these can range from computers and vehicles to major components such as inventory, machinery or      other physical      assets. The buyer’s goal is often to acquire an operating business and your physical assets may be an essential part of the functioning of the business.

As with accounts receivable and other current assets the company’s physical assets will be included in the sale to a buyer. So, if you have old equipment or inventory the buyer will need to deal with their liquidation or disposal since they are acquiring the entire business and all of its assets.

For an asset sale the buyer can determine what tangible assets it wants to acquire. They may only want to purchase inventory they can sell within a certain period of time, well-maintained equipment, newer vehicles and specified fixtures.


In some cases, such as in a stock sale, the company’s liability will be assumed by the buyer. This includes any debt or loan obligations related to the business. It’s important to note that most loans are not included in asset sales and will depend on the specific agreement between both parties.

Is Long-Term Debt Assumed by The Buyer?

When selling a business, the assumption of long-term debt is an important consideration. Depending on the terms agreed upon between the buyer and seller, long-term debt may or may not be assumed by the buyer. Generally speaking, it is up to the seller and buyer to negotiate which party will assume any outstanding liabilities associated with the business sale – however, there are certain factors that can influence who assumes the long-term debt.

Ultimately, the answer to the question of who assumes long-term debt when selling a business will depend on the terms agreed upon between the buyer and seller. It is important to ensure that all parties are aware of their obligations prior to signing any contracts, as this can have a significant impact on the sale of the business.

Selling a business can be an intimidating process, but with the right guidance and support from Destined it does not have to be. Our team of experienced professionals will work closely with you throughout the entire process to ensure that all necessary elements are included before the deal is sealed.

Let us be your guide to the business sale that will change your life.

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