Buying a business in the United States

Most purchases of privately owned US businesses take one of two forms.

In an asset purchase, you (usually through a new company formed for the deal) buy the assets you want: equipment, inventory, customer contracts, intellectual property, the trading name and goodwill. You take on only the liabilities the purchase agreement lists, and the seller's company keeps the rest.

In a stock purchase (a share purchase in most other countries), you buy the owner's shares in a corporation or the membership interests in a limited liability company (LLC). The company itself does not change, so its contracts, permits, history and liabilities, known and unknown, stay with it.

Buyers of smaller businesses often prefer an asset purchase because it limits what they inherit and can improve their tax position. Sellers often prefer a stock sale. The right answer depends on the type of entity, how many contracts and permits need consent to move and the tax result for both sides, so settle it with advice before your letter of intent (heads of terms in the UK) fixes the structure.

Two tax points shape many deals:

• When a group of assets that makes up a business changes hands and goodwill or going concern value attaches, or could attach, to them, the buyer and the seller each file IRS Form 8594 to report how the price is allocated across the assets. Agree the allocation in the purchase agreement so the two filings match.
• Section 338 of the Internal Revenue Code allows certain stock purchases to be treated as asset acquisitions for tax purposes. Whether an election is available, and whether it helps, is a question for your tax adviser.

A typical process runs from a non-binding letter of intent, through due diligence, to a purchase agreement with representations, warranties and indemnities, often with an escrow or holdback of part of the price.

Most buyers combine their own equity with debt and some deferred payment to the seller. Search funders and independent sponsors usually add equity from investors.

Loans made by approved lenders and partly guaranteed by the U.S. Small Business Administration are a common route for smaller acquisitions. The maximum SBA 7(a) loan is $5 million, and a complete or partial change of ownership is an eligible use. The detailed rules, including how much equity you must put in and when a seller note can count towards it, sit in the SBA's standard operating procedure. A revised version, SOP 50 10 8.1, applies to loans that receive an SBA loan number on or after 1 October 2026. It revises the requirements for change of ownership loans, including quality of earnings reports for some of them. Ask your lender which version applies to your loan, and read Financing an acquisition for how these rules shape a deal.

Conventional bank loans, lending secured on receivables or equipment, seller finance and earn-outs fill the remaining gaps. A seller note usually ranks behind the bank, which limits when the seller can be paid. An earn-out ties part of the price to future results, so the earnings it measures need careful definition.

In a stock purchase the employing company stays the same, so employment normally continues without a break, along with the company's benefit plans, payroll history and any employment claims.

In an asset purchase the seller's company is the employer. The buyer usually offers jobs to the staff it wants to keep, and the seller ends their employment at closing. The purchase agreement should say who pays accrued wages, paid time off, bonuses and commissions, and state law can govern how final pay and unused leave are handled.

Three federal points come up often:

• WARN Act. The Worker Adjustment and Retraining Notification Act covers employers with 100 or more employees, not counting part-time staff, and generally requires 60 days' written notice before a plant closing or mass layoff. In a sale, the seller is responsible for notice up to and including the date of the sale and the buyer after it.
• Form I-9. A buyer that keeps the seller's workforce can treat the staff as new hires and complete new forms, or treat them as continuing in employment and take over the seller's forms. Keeping the old forms means accepting responsibility for any errors or omissions in them.
• Worker classification. Check whether people paid as independent contractors are employees in practice. See contractors who are employees in practice.

Much of the regulation that matters to a smaller acquisition sits at state and local level.

• State taxes. Some states can hold a buyer responsible for a seller's unpaid taxes. California, for example, requires a buyer of a business to withhold enough of the price to cover the seller's sales and use tax liability unless the buyer obtains a certificate showing that nothing is due. Ask your attorney which clearances apply in each state where the business operates, and see unpaid taxes a buyer could inherit.
• Liens. Lenders give notice of security interests in business assets by filing financing statements under the Uniform Commercial Code, usually with a central state office such as the secretary of state. A UCC search on the seller shows whether assets you plan to buy are pledged to someone else.
• Licences and permits. Business, professional, health, alcohol and contractor licences are issued at state, county or city level. Many are tied to the owner, the entity or the premises and may not move with an asset purchase, so allow time for new applications.
• Federal merger review. The Hart-Scott-Rodino Act requires notice to the Federal Trade Commission and the Department of Justice before deals above a size threshold that is revised each year. For 2026 the size-of-transaction threshold is $133.9 million, so it affects only larger deals.
• Foreign buyers. The Committee on Foreign Investment in the United States reviews certain foreign investments in US businesses for national security risk. Filing is largely voluntary, but it is mandatory in some cases, such as a foreign government acquiring a substantial interest in certain businesses or a deal involving certain critical technologies.
• Sector regulators. Healthcare, financial services, transport and alcohol businesses can need regulator approval or new registrations after a change of ownership.

• An attorney who handles business acquisitions in the relevant state, to advise on structure, review the letter of intent and purchase agreement and run legal diligence.
• A certified public accountant or tax adviser, for entity choice, price allocation and state tax exposure.
• An accounting firm for a quality of earnings review on larger deals, or where your lender requires one.
• A lender that regularly finances acquisitions.
• A business broker or M&A adviser. They usually act for the seller, so be clear about whose interests they represent.
• An insurance broker, for cover from the first day and, on larger deals, representations and warranties insurance.
• Specialists where the business needs them, such as an environmental consultant for sites with contamination risk or a regulatory attorney for licensed sectors.

• Decide between an asset purchase and a stock purchase with advice, before the letter of intent.
• List every licence, permit, lease and key contract that needs consent or a new application, and build the timing into the closing date.
• Run lien, litigation and state tax checks on the business and the seller.
• Get a lender's term sheet and, for an SBA loan, confirm which version of the rules applies.
• Agree the price allocation, the working capital target, any escrow or holdback and the terms of the seller's non-compete, taking advice on how your state treats non-competes.
• Plan employee offers, benefits, payroll and your Form I-9 approach before closing.
• Work through the diligence document request list and Due diligence: what to check and in what order.

If you want a listing's figures and public records checked before you commit to adviser fees, see what's in a dossier.