The choice between an asset deal and an equity deal looks like a structuring detail. It decides three things at once: who carries the historical risk, who gets the step-up in tax basis and who pays the tax bill. Get it right at the LOI rather than fighting about it in the documents.
What the market does
In 2025, 71% of deals were mergers and about 26% were stock purchases; only a small share were pure asset sales. That mix has held remarkably steady for four years.
The bigger number is 57%: the share of deals that sign first and close later, sometimes weeks later and sometimes months. That gap is where covenant breaches, regulatory holds and deal fatigue strike. The structure you choose at the LOI defines the contract risk you’ll live with for that whole stretch.
The asset deal
In an asset deal, the buyer picks the assets it wants. The seller keeps the corporate shell, along with the legacy liabilities.
Buyers love this structure for the tax economics. They get a step-up in basis to fair market value, so they can amortize intangibles over fifteen years and depreciate tangible assets on a fresh schedule. The cash tax savings are often worth 5% to 15% of the purchase price in present-value terms. That’s why buyers push hard for it, and why they’ll sometimes offer a higher headline price to get there.
For a C-corp seller the cost is significant, and this is where founders need to do the math. The gain is taxed twice: once at the corporate level on the asset sale, and again at the shareholder level when the proceeds are distributed. Federal tax alone comes to roughly 40% (21% at the corporate level, then 23.8% on what’s distributed), and in a high-tax state like California the combined bill can pass 50%. On a clean stock sale, the federal rate is typically 23.8%.
QSBS doesn’t help at the corporate level, because that gain belongs to the company, not to you. If you’ve spent five years preserving QSBS, an asset deal can wipe out much of its value at signing. On top of that, you’ll be chasing consents on every contract that has to be assigned.
The equity deal
In an equity deal, the buyer takes the whole company, known liabilities and unknown ones, and the seller gets a clean break.
Sellers favor this for reasons that mirror the asset analysis. There’s a single layer of capital gains tax at the shareholder level. QSBS can be preserved. Installment sale and rollover equity treatment are both available. And mechanically it’s cleaner: in a stock purchase or merger, contracts ride along, subject to their change-of-control provisions.
The buyer’s burden is that it inherits everything not yet surfaced. It takes a carryover basis, with no step-up and no fresh amortization. It inherits the historical tax exposure: sales and use, payroll, R&D credits. And if the company has net operating losses the buyer hoped to use, Section 382 may limit them.
Model both before the LOI
This isn’t only a tax decision. Structure shapes diligence, indemnification and post-closing risk allocation across the entire deal. But the tax delta is usually what drives the negotiation, so model both structures, with real numbers, before you sign the LOI.
Ahmed Hasan is the founder and CEO of Venture Bridge Law, a corporate and M&A boutique. This article is general information, not legal advice.