A merger in advance and a triangular merger in advance generally require the agreement of third parties, since the practice in question ceases to exist after the merger and all its assets are held by the surviving entity. One of the ways to protect yourself and make the most informed decisions about buying shares or assets in a practice is due diligence. This means you hire a lawyer and accountant to search public records, review the seller`s essential contracts, and analyze the seller`s financial records. Proper due diligence can prevent a buyer from making costly business mistakes. Buying assets is generally considered the best option for a buyer. In the event of an asset purchase, the buyer is usually protected from any inventory-related debt. It is important to keep in mind that, in certain circumstances, certain obligations cannot be circumvented by opting only for asset purchases. The buyer and his attorney must review the seller`s essential contracts as well as the seller`s debts, including for unpaid federal, state, and municipal taxes. In some cases, the pledge rights of the seller`s creditors may be subordinated to the seller`s assets, which may lead to the cancellation of the contract of sale. How a merger is taxed depends on its structure. Generally speaking, forward and triangular forward mergers are taxed as purchases of securities, while reverse triangular mergers are taxed as share purchases.
The advantage of a stock purchase over an asset purchase really depends on the page of the transaction and what you want to get during the trade. Authorization to buy shares can be problematic if the target is a large number of shareholders. Unless agreements are reached prior to the conclusion of a transaction, buyers cannot compel shareholders to sell. Thus, a holdout shareholder could refuse to sell to the buyer. This result can be very undesirable for buyers and ultimately lead to the disintegration of the agreement. Sellers typically make wealth transactions because the seller has potential liabilities without having significant assets that they could otherwise use to honor those liabilities. Similarly, the tax treatment of an asset sale is generally less favorable to sellers than a share sale. The practice and its shareholders may generate potential taxable income, which could result in double taxation of the proceeds of the sale. Companies that have taxation on passports, such as partnerships, LLCs and S companies, can avoid the problem of double taxation and therefore accept an asset purchase structure. The main risk for buyers during an asset purchase transaction is that a buyer may not buy all the assets they need to carry out the practice.
There are also several aspects of selling assets that can take time and increase transaction costs, for example. B the list of certain assets and the determination of their value. Sometimes, for reasons of responsibility, buyers wish to maintain the target practice as a separate legal entity, so the buyer will merge the target into a 100% subsidiary of the buyer, called Forward Triangular Merger. Once completed, the subsidiary will survive the merger and holds all assets and liabilities of the practice. Acquiring medical practices is a difficult and risky strategic choice. In deciding whether to proceed with a transaction of assets or shares to purchase a medical practice, the buyer and seller must consider the facts in their particular situation. To protect a buyer from liabilities, the preferred method is an asset transaction instead of a share purchase. Although a buyer may, under certain conditions, favor a transfer of shares, the seller is the party that benefits most from a share transaction. Both parties should consult with their lawyers, accountants and financial advisors to analyze their specific situation, perform due diligence and recommend the best way to proceed.