When selling your internet business there are two types of transactions that can be structured; a stock sale or an asset sale. As a rule of thumb, nearly all sales of internet business sales are executed as asset sales.
During an asset sale, when a buyer purchases your internet business, he does not purchase your corporation or LLC. He instead purchases the assets of that business entity. Most buyers prefer to do so because then they do not take on any past, current or future tax or legal liabilities associated with the entity and their tax basis is more favorable in an asset purchase as well.
Additionally, many times a website seller places a great deal of non-operating assets or liabilities in the name of the entity rather than personally. It would therefore be very difficult to transfer or remove these assets prior to a sale. A knowledgeable website business broker will actually work with you on this process by itemizing each asset and defining its value based on the purchase price.
A reputable internet business broker usually provides this added service free of charge, which helps limit the legal costs involved with closing the deal. While most deals are asset sales, it is however sometimes necessary to sell online businesses via a stock transaction. Some internet businesses that have contracts or licensing agreements with major companies must be sold as stock sales as some of the contracts or agreements may be tied into the sellers’ corporation or LLC.
The buyer would then purchase the entity and would more than likely request a lower valuation due to the associated transferrable risk as well as the more unfavorable tax treatment.