Asset sale vs share sale: What’s the difference when selling or buying a business?

Posted by Sarah BurkeJan 09, 20260 Comments

When clients come to SLB Legal for help with buying or selling a business, one of the first questions we ask is whether the transaction will be an asset sale or a share sale.

It is important to know the difference between the two. While both result in a business sale, they do so in different ways. They also carry different risks, benefits, legal and financial implications. All of these should be considered before deciding on the sale structure.

What is an ‘asset' sale of business?

An asset sale occurs when the buyer purchases specific business assets (or all of them) from the seller.  These assets can be physical and non-physical assets, including items such as the business:

  • equipment, stock or vehicles;
  • intellectual property,  goodwill or the benefits of a lease or trading contracts.

The assets being purchased will transfer from the current seller entity to the new buyer entity. Anything not sold remains with the seller, which is typically a separate entity from the buyer.

Asset sale pros and cons

Some of the key advantages and disadvantages for sellers and buyers of an asset business sale can include:

Who?

Pros

Cons

Seller
  • May allow flexibility for the seller to retain certain assets (i.e. vehicle, real estate).
  • Often less need for extensive warranties or indemnities compared to a share sale (as most legal liabilities of the business stay with the seller entity).
  • Third-party consents may delay or prevent completion (e.g. from landlords, contracting parties or licensing authorities).
  • More complex documentation and completion steps may be required to transfer purchase assets to the purchaser entity.

Buyer
  • The buyer may be able to pick and choose which assets they do (and don't) want to purchase.
  • Existing liabilities of the seller entity will usually stay with the seller (unless the buyer decides to take them on).
  • The buyer can establish a new entity to operate the business post-completion, allowing fresh structuring.
  • Transfer of key assets/rights (i.e. leases or licence/permits) can require third-party consents which can be a lengthy process or also not possible to obtain.
  • Business continuity may be disrupted, for example if not all contracts (i.e. with customers and suppliers) or employees transfer.  

What is a share sale of business?

A share sale occurs when the buyer purchases shares from the seller in the company that owns and operates the business.

In a share sale, the company entity operating the business continues to exist post-sale and generally all of its pre-sale assets and benefits.

In other words, there is no need to transfer the customer or supplier contracts, leases, licences, equipment or employees because the legal entity, the company, will be the same post-sale (but for the change in share ownership).

Share sale pros and cons

Some of the key advantages and disadvantages for sellers and buyers of a share business sale can include:

Who?

Pros

Cons

Seller
  • Can be quicker in terms of completion steps, because the company retains ownership of its assets (i.e. no need to transfer individual assets, assign contracts, etc).
  • Can offer a cleaner and more complete exit from the business, without needing to manage asset transfers, wind up the seller entity, or retain any part of the business.
  • Can often require extensive seller warranties and indemnities, increasing the seller's post-sale risk exposure.
  • Usually, no part of the business or the business assets will be able to be retained (i.e. as they are owned by the company, which continues post-sale).

Buyer
  • Less impact on business continuity, as the business will operate under the same company post-sale.
  • Valuable contracts/licensing can be maintained as there is often no need to transfer individual contracts, licences or registrations.
  • Buyer usually takes on all company liabilities, including any unknown debt, tax, legal, employee or financial issues.
  • The level of due diligence is often greater and lengthier.
  • Can be greater risk of liabilities emerging post-sale when not protected (i.e. due to non-compliance with laws or tax obligations).

So, which one is right for you?

The right business sale structure depends on your goals, the nature of the business, and practical factors.

For example, if a buyer wants only specific assets or a part of the business (such as a single division), an asset sale may be more suitable. If the business relies on critical licences, permits, or contracts that are hard to transfer, a share sale may offer a smoother transition.

It is also important to consider tax outcomes, potential liabilities, and your future plans for the business. You should engage your professional advisors, such as your accountant and a commercial lawyer, early to help you make an informed decision.

Need help with a business sale or purchase?

At SLB Legal, our experienced business sale lawyers help business owners, buyers and investors across Australia navigate business sales and acquisitions with clarity and confidence.

Whether you are selling your business, buying or investing in one, SLB Legal can help you with the structure and the terms of your deal.

Contact SLB Legal today for practical legal advice on your asset or share sale.

About the Author

Sarah Burke

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