When preparing to sell, one of the earliest decisions is whether the transaction will be an asset purchase or a stock purchase. In an asset sale, the buyer acquires specific equipment, customer contracts, and goodwill, while leaving past corporate liabilities with the seller. In a stock sale, the buyer acquires the legal entity itself, including its entire operational history.
Buyers frequently push for asset sales for favorable depreciation schedules, but that choice can create unexpected tax friction or lingering liability for the seller. A transaction attorney works alongside your CPA to negotiate representations, warranties, and indemnification caps so your net proceeds and personal exposure remain protected.
The second key area where an attorney proves invaluable is structuring earnouts. When a buyer and seller have a valuation gap, an earnout bridges the difference by tying a portion of the purchase price to future financial performance over one to three years.
Earnouts carry real risk for the seller if they are poorly drafted. Once you hand over the keys, the new owner controls daily operations. If they reduce marketing budgets, reallocate corporate overhead, or redirect sales staff, hitting those performance targets becomes difficult. A seasoned attorney drafts clear operating covenants for the earnout period and establishes precise accounting definitions for metrics like gross revenue or adjusted EBITDA.
Bringing a trusted business attorney into the process early aligns the legal mechanics of the deal with your financial goals, preventing costly disputes after closing.
