This is the structural choice that decides who carries the past. In an asset purchase the buyer takes what it wants and leaves the entity with you. In a stock purchase the entity changes hands with everything in it. Buyers almost always prefer the first and sellers usually prefer the second, and the difference is settled with price.
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What each side gains
The buyer in an asset purchase gets a clean line under historic liabilities and a fresh depreciable basis. The seller in a stock purchase gets a cleaner exit, no entity to wind up and frequently a better tax result. Neither position is unreasonable, and neither party is entitled to both the structure they want and the price they want.
Where the money actually moves
Quantify the difference before negotiating: ask your accountant what each structure leaves you after tax. That number is the size of the concession you are being asked for, and it is often larger than the points of commission sellers spend their energy on. A buyer who insists on assets can reasonably be asked to pay for the difference.
Practical consequences
An asset purchase needs consents for contracts, leases and licenses, which takes time and can give counterparties leverage. A stock purchase needs a clean corporate record and wider warranties from you, because the buyer is inheriting everything. Whichever is chosen, it should be named in the letter of intent, not discovered during drafting.
Questions people ask about asset purchase vs stock purchase
Which is more common in small business sales?
Asset purchases, by a wide margin, largely because buyers and their lenders prefer the clean line and the fresh basis.
Can we split the difference?
Sometimes, through the price or through a tax election that changes how a stock purchase is treated. Both are accountant questions and both are worth asking before you concede the structure.
Does it change my warranties?
Yes. A stock purchase generally means wider warranties, because the buyer inherits the entity's whole history rather than a defined list of assets.
What is an asset sale?
The buyer takes named assets out of your company and leaves the entity, with its history, with you. In a stock purchase the entity itself changes hands with everything in it, which is why buyers usually prefer assets and sellers usually prefer stock.