Asset Sale vs. Stock Sale: What Connecticut Business Owners Think About Before Selling
- Marc Lowe
- Aug 8
- 4 min read
In Connecticut, selling your business is rarely just a numbers game—it’s a strategy game. The decision you make on how to structure the sale can be just as important as the price you negotiate.
Whether you’re a manufacturer in New London, a tech firm in Stamford, or a family-owned business along the shoreline, you’ll likely face two primary deal structures: the asset sale and the stock sale. On paper, they may seem like different routes to the same goal, but in reality, they can lead to very different tax bills, legal risks, and retirement outcomes.
This isn’t theory—it’s something our firm has navigated for Connecticut clients time and again. A few years ago, I worked with an American chess board game company trying to sell during a recession, while interest rates were climbing. The economy had made buyers cautious, and the structure of the sale became the deciding factor in whether the deal would move forward at all.
What is an Asset Sale?
An asset sale is when the buyer purchases specific assets from your company—equipment, inventory, intellectual property, customer lists—rather than the company itself. You keep the legal entity, but you no longer own the assets sold.
Why it matters for Connecticut business owners:
Buyers often favor asset sales because they can receive a step-up in tax basis, allowing them to depreciate or amortize assets at fair market value, reducing their taxable income in future years.
Buyers also typically avoid most of the seller’s liabilities.
For the seller, though, there’s a potential downside—especially if your business is structured as a corporation. You may face double taxation: once at the corporate level on any capital gains, and again at the shareholder level when the proceeds are distributed.
Advantages of Asset Sale:
Step-up in basis for assets (tax savings for the buyer)
Buyer avoids most liabilities
Disadvantages of Asset Sale:
Potential double taxation for sellers
Asset transfers can be complicated, requiring new agreements with vendors, landlords, or customers
What is a Stock Sale?
In a stock sale, the buyer purchases your ownership interest in the company. The legal entity, along with its assets, liabilities, contracts, and employees, stays intact—just under new ownership.
Why it matters for Connecticut business owners:
This can be a simpler transaction for the seller, since contracts and relationships often remain unchanged.
Cash from the sale typically goes directly to you, the shareholder.
Buyers, however, may hesitate. Without special tax elections, there’s no step-up in basis, meaning higher taxes later if assets are sold. Plus, buyers take on all liabilities—both known and undisclosed.
Advantages of Stock Sale:
Simpler transfer—contracts and vendor relationships often stay in place
Proceeds go directly to shareholders
Disadvantages of Stock Sale:
No step-up in basis without special elections
Buyer assumes all risks and liabilities of the company
Why the Structure Matters in Connecticut
Selling a business in Connecticut comes with its own set of considerations:
State Tax Implications: Connecticut’s tax treatment of capital gains, combined with potential federal taxes, can significantly impact your net proceeds.
Industry Expectations: Certain industries in Connecticut—such as manufacturing, professional services, and technology—have norms around deal structure that influence what buyers expect.
Local Contracts & Permits: In an asset sale, transferring state-issued licenses, permits, or municipal contracts can require additional approvals, which may delay closing.
The Negotiation Advantage
The right deal structure can be a powerful negotiation tool. For example:
A buyer may push for an asset sale for tax benefits.
A seller, facing a double tax hit in an asset sale, might negotiate for a higher purchase price to offset their additional tax burden.
Savvy negotiators—especially those with a skilled Connecticut-based tax adviser and financial planner—can use these differences to create win-win scenarios.
A Real-World Reminder
When we advised the chess company during the 2022 sale, the market was uncertain. Buyers were nervous, and financing costs were rising. The final outcome wasn’t determined by the sticker price—it was shaped by the structure of the deal, the timing of payments, and the way both sides balanced tax benefits against legal risks.
Key Takeaway for Connecticut Business Owners
If you’re thinking about selling your business—whether this year or five years from now—don’t wait until you have an offer in hand to think about structure. The choice between an asset sale and a stock sale can change the after-tax value of your deal by hundreds of thousands of dollars.
The best time to plan is before you start talking to buyers, so you can position your company in a way that maximizes your outcome.
About The Author
Marc Lowe is the Founder & President of In The Money Retirement Planning. He is a Certified Financial Planner and member of NAPFA National Association of Personal Financial Advisors, XY Planning Network & Fee-Only Network. He works with retirees and those approaching retirement. He has over a decade of experience helping these folks grow their net worth, organize their finances and build better lives for themselves and their families.
The information presented in this Presentation is the opinion of the author and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through In The Money Retirement, an investment adviser registered with the state of Connecticut. The information linked to on third-party sites is being provided strictly as a courtesy and convenience. When you link to any of the web sites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. When you access these websites, you are leaving our website and assume any and all responsibility and risk for use of the web sites you are visiting.The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
Comments