THE BUSINESS BUYER’S BEST FRIEND: The Section 338(h) Election
Every purchase and sale of a business is structured as either a sale of assets or a sale of equity (stock or membership interests). In an asset sale, the buyer usually creates its own company and purchases the assets (including equipment, inventory, accounts, and intangible goodwill), while the seller takes cash into its existing company and liquidates it. In an equity sale, the buyer is purchasing the stock or membership interests of the seller and continuing the existing entity. As a general rule, buyers want to structure the transaction as an asset purchase, while sellers want the transaction to be…