Ideally, exit planning should begin several years in advance. Early preparation increases valuation and ensures smoother negotiations.

The right strategy depends on goals. Many small business owners pursue third-party sales or ESOPs, while larger companies often benefit from mergers or acquisitions.

Due diligence is the process of investigating financial, legal, and operational risks before closing. It helps identify liabilities, verify valuations, and strengthen negotiation positions.

Yes. In most cases, mergers require shareholder approval, and dissenting shareholders may have appraisal rights to challenge the valuation or receive cash for their shares.

Not all mergers require government approval, but larger transactions or deals in regulated industries may need clearance from agencies like the FTC, DOJ, or industry-specific regulators.

A merger combines two or more companies into one surviving entity, while an acquisition occurs when one company purchases another’s stock or assets.

Yes. For sellers, stock purchases are often taxed at capital gains rates. Buyers typically cannot “step up” the tax basis of the company’s assets, which may affect future deductions.

It depends on governing documents and state law. In some cases, minority shareholders have rights to block, challenge, or demand fair value for their shares.

Not entirely. Buyers inherit all liabilities of the company. However, risks can be managed through due diligence, indemnification provisions, and escrow arrangements.

Stock purchases are simpler to execute because the company remains intact, preserving contracts, permits, and relationships. Asset purchases, while offering liability protection, often require more paperwork and consents.

No. Buyers must choose which employees to hire and issue new contracts, though they may assume existing benefits or tenure for retention purposes.

Yes. Buyers often gain a stepped-up basis in acquired assets, creating valuable tax deductions.

Typically no. Unlike stock purchases, asset deals usually require only board or management approval, unless otherwise stated in governing documents.

The ability to avoid inheriting unknown liabilities while selectively acquiring only valuable assets.

Yes. Most agreements include termination clauses, either for breach of terms or for convenience, but the scope of surviving rights (like confidentiality) must be addressed.