You have found a business worth acquiring. The price is agreed, the handshake is done. Then your accountant asks a question that stops the room: are you buying the assets, or the shares?

It sounds like a technicality. It is not. This single choice shapes your tax bill, the risks you inherit, and even whether the deal gets done at the price you agreed. For a founder making their first acquisition, it is one of the highest-value hours you will spend on the whole transaction.

The two structures

In a share sale, you buy the company itself. You acquire the shares from the current owners, and the entity keeps operating exactly as it was. You step into the seller’s shoes as owner of the whole box: the assets, the contracts, the employees, the history – and everything attached.

In an asset sale, you do not buy the company. You buy the specific things that make the business work: equipment, stock, customer lists, goodwill, intellectual property, and whichever contracts you choose to take on. Those assets move into an entity you control. The seller’s original company stays with the seller, usually to be wound up.

A useful picture: a share sale is buying the whole house, including whatever is hiding in the basement. An asset sale is walking through and taking only the rooms and furniture you actually want.

The case for a share sale

Buying the shares keeps the business intact, and occasionally it is the only viable option.

• Continuity, with nothing to move. Because the company keeps operating unchanged, its contracts, leases, licences and permits generally stay in place. That matters when value sits in assets that are hard to transfer – a valuable lease, a government licence, key customer contracts with no change-of-ownership clause. In an asset deal each could require consent and might be lost; in a share deal they simply continue.
• Employees carry on seamlessly. Staff stay employed by the same company on the same terms, with entitlements travelling with them automatically.
• No GST, and often no stamp duty. Share transfers are not subject to GST and usually attract no stamp duty. The exception is landholder duty: if the company owns significant land above the state threshold, duty can apply to the share purchase, and the buyer usually bears it. Check early if the target holds real estate.
• You may inherit useful tax attributes. Buying the company can mean acquiring carried-forward tax losses and franking credits. Strict rules apply and they are never a given, but in the right circumstances they add real value.

The catch – and it is a big one, usually the reason buyers lean towards an asset sale:

You inherit everything, seen and unseen. When you buy the shares, you buy every liability, every past tax position and every problem, whether or not it was disclosed. This is why share deals demand deeper due diligence and a heavily negotiated contract, with warranties and indemnities (seller promises about the state of the company, backed by a right to compensation) and sometimes part of the price held in escrow.

The case for an asset sale

Most first-time buyers, once they understand the mechanics, lean toward an asset sale.

• You choose what you take on. You cherry-pick the assets you want and, crucially, the liabilities you accept. Anything not named in the sale agreement stays with the seller. Unknown debts, a brewing dispute, a tax problem nobody mentioned – none of it follows you. This is the single biggest reason buyers favour asset deals.
• A step-up in the tax cost of assets. You generally record the assets at the price you paid. That fresh, higher cost base means more depreciation deductions going forward and a lower taxable gain if you sell later.

The trade-offs:

• GST applies, unless the deal is a going concern. Asset sales are generally subject to GST, but many business sales qualify for the GST-free “supply of a going concern” concession. To use it, the seller must supply everything needed to keep the business running and keep operating it until settlement, you must be registered for GST, and both parties must agree in writing. Get the wording right and GST falls away.
• Stamp duty can bite. Duty on asset transfers varies by state and asset type, and can apply to things like real property and, in some states, goodwill. Worth modelling before you commit.
• More things to physically move. Every contract, lease, licence and permit you want to keep has to be individually transferred, and many need the other party’s consent. Employees are terminated by the seller and re-hired by you, with entitlements dealt with along the way. More work – and more risk that a key contract does not come across.

Why you and the seller will not simply agree

Structure becomes a negotiation because your interests often pull opposite ways. You usually prefer an asset sale, for the clean-risk and tax-step-up reasons above. The seller frequently prefers a share sale, because selling shares can unlock the 50 per cent CGT discount and the small business CGT concessions, and let them walk away cleanly. That gap is real money, and it usually gets bridged through price. Knowing this going in means you can trade structure against price deliberately, rather than being caught out.

So which one?

There is no universally right answer – only the right one for this business and this deal. A share sale tends to suit a business where continuity is critical, or where value is locked in contracts, licences or leases that are hard to move. An asset sale tends to suit a straightforward business whose value sits in transferable assets and goodwill.

The numbers rarely speak for themselves until someone models them. The best structure depends on the mix of assets, the state you operate in, the GST and duty position, and the tax profile of both sides. Work it through with your accountant and lawyer before you sign anything – ideally before you have even agreed a price, because the structure and the number are two sides of the same negotiation.

Disclaimer: This article is for general informational purposes only and does not constitute financial, legal or tax advice. Business acquisitions carry real consequences that depend on your situation and the state you operate in, so please speak with a qualified adviser (hey, that’s us!) before making decisions based on your specific circumstances.