Business Law · Haute Lawyer Network
What Is an Asset Purchase Agreement?
Last reviewed: November 2026 · Jurisdiction: United States (federal tax; state contract and bulk-sales law)
An asset purchase agreement (APA) is the contract a buyer uses to acquire specific assets of a business — equipment, inventory, contracts, intellectual property, customer lists, goodwill — rather than buying the company itself. The seller's legal entity stays with the seller, and the buyer takes only the assets and the liabilities the agreement lists. That cherry-picking is the main difference from a stock purchase agreement (SPA), where the buyer buys the owners' shares and the company keeps all of its history, good and bad.
At a glance
| Question | Asset purchase (APA) | Stock purchase (SPA) |
|---|---|---|
| What the buyer gets | Listed assets only | The whole company (shares) |
| Liabilities | Only those the buyer agrees to assume | Stay with the company, so the buyer inherits them indirectly |
| Contracts and permits | Often must be assigned; some need third-party consent | Usually stay in place (watch change-of-control clauses) |
| Who signs as seller | The company | The shareholders |
| Tax reporting | Price allocated across asset classes; buyer and seller generally file IRS Form 8594 | Generally no asset-by-asset allocation |
| Paperwork | Bills of sale, assignments, deeds, title transfers for each asset type | Share transfer plus closing documents |
How an asset purchase agreement works
Most deals start with a letter of intent, then due diligence, then the definitive agreement. A typical APA covers:
- Purchased assets. A schedule listing exactly what transfers.
- Excluded assets. What the seller keeps (often cash, certain accounts or personal items).
- Assumed liabilities. The specific obligations the buyer takes on, such as post-closing duties under assigned contracts.
- Excluded liabilities. Everything else stays with the seller — a key reason buyers prefer APAs.
- Purchase price and adjustments. Fixed price, working-capital adjustment, escrow or holdback, sometimes an earnout.
- Representations and warranties. Statements about title, condition of assets, compliance and financials.
- Indemnification. Who pays if a representation turns out to be wrong, with caps, baskets and survival periods.
- Covenants and conditions. How the business runs before closing, third-party consents, and often a non-compete from the seller.
- Closing deliverables. Bill of sale, assignment and assumption agreement, IP assignments, deeds or lease assignments.
Why buyers and sellers choose one structure or the other
Buyers often prefer an APA because they can leave unknown liabilities behind and, for tax purposes, generally take a basis in the assets equal to what they paid.
Sellers often prefer an SPA because it's a cleaner exit: the whole company goes, with its liabilities, in one transfer.
The final structure usually depends on negotiation, tax advice, and practical issues such as whether key contracts, licenses or permits can be assigned.
Taxes: the allocation step
When a group of assets that makes up a trade or business is sold, the IRS says both the seller and the purchaser must report the sale on Form 8594 (Asset Acquisition Statement Under Section 1060) if goodwill or going-concern value attaches, or could attach, and the buyer's basis is determined only by the amount paid. How the price is allocated across asset classes affects both sides' taxes, so it is often negotiated in the APA itself. Ask your tax adviser how this applies to your deal.
Liabilities that can follow the assets anyway
An APA limits what the buyer takes on, but it is not a perfect shield. Depending on the state and the facts, courts can impose successor liability (for example, where a deal is treated as a de facto merger or a "mere continuation" of the seller), and a few states still have bulk-sale or tax-clearance rules. Employment, environmental and tax obligations deserve particular diligence.
Checklist before you sign
- Is every asset you're paying for on the schedule, including IP and domain names?
- Which contracts need consent to assign, and who obtains it?
- Are the excluded liabilities stated broadly enough?
- How is the price allocated for tax purposes, and do both sides agree?
- What do indemnification caps, baskets and escrow look like?
- Do you need a seller non-compete or transition services agreement?
- Have employment, lease and permit transfers been planned?
Talk to a business attorney
Browse Business Law Attorneys on Haute Lawyer.
Featured: Natasha Belon, a Denver business and real estate attorney and founder of Lotus Law PLLC, advises entrepreneurs and investors on transactions. Glenn L. Udell of Brown, Udell, Pomerantz & Delrahim in Chicago practices corporate, real estate and business litigation law.
Related questions
- What Is a Letter of Intent?
- What Is an Earnout?
- What Is a Breakup Fee?
- Reps and Warranties Claims
- Do I Need a Lawyer to Sell My Business?
Sources
- IRS, About Form 8594, Asset Acquisition Statement Under Section 1060 — irs.gov/forms-pubs/about-form-8594 (checked Nov. 10, 2026)
- 26 U.S.C. §1060 (Cornell LII)
*This article is general information, not legal or tax advice.*
Frequently Asked Questions
What is the difference between an APA and an SPA?
An APA buys selected assets and liabilities from the company; an SPA buys the company's shares, so everything inside the company comes along.
Who signs an asset purchase agreement?
The buyer and the selling company. Owners sometimes sign too, for example to give a non-compete or guarantee.
Does the buyer take on the seller's debts?
Only the liabilities the APA says it assumes, subject to exceptions such as successor liability under state law.
Do I need IRS Form 8594?
When the sale is of a group of assets making up a trade or business and goodwill or going-concern value attaches or could attach, the IRS says both buyer and seller generally must file it.
Do I need a lawyer for an asset purchase?
The APA allocates risk for years after closing, so most buyers and sellers use a business or M&A attorney and a tax adviser.
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