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This is a new one for me.

  • Say I work for a startup and own 50,000 shares at $1.00 each ($50,000).
  • The startup is acquired by another company through an asset purchase agreement, making the entire transaction taxable.
  • Assume the tax rate is 30% ($15,000)
  • Assume my personal tax rate is 30%.
  • In the final settlement, do I receive $50,000 or do I receive $35,000 and the ensuing personal tax responsibility?

In public markets when there has been an asset purchase and I am forced to divest, I have always received the full value of my stock and been responsible for only my personal taxes. I'm not sure if this works the same in a private transaction.


It is a US transaction. I overheard a conversation that the corporate taxes would dilute the shares I own in order to fund the tax liability. I have never heard of this.

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    Tax questions need to specify the country/locality as tax laws vary between jurisdictions.
    – JohnFx
    Commented Oct 7, 2021 at 18:13
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    It's not reasonable to assume that the buyer would pay the same amount for a stock purchase as they would for an asset purchase. How much more the buyer might be willing to pay for an asset purchase will depend on how much they value the benefits of an asset purchase including the elimination of liability issues, obligations to employees, etc. Commented Jan 5, 2023 at 1:08
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    Another misconception in the question is that the corporation would pay tax on the entire value of the assets. Rather, they'd pay tax on the capital gain. It may be that the startup was built around some intellectual property such as a patent that had considerable value when the corporation was founded so the capital gain might be much less than the price of the assets. Commented Jan 5, 2023 at 1:33

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You will not receive money from an Asset Purchase Agreement (APA) as an owner of the company. The company will receive the money from the sale of its assets. This is not a purchase of the company itself (which you own).

It sounds like you are saying the APA substantially comprises all of the assets of the business and the company you are an owner of will effectively be winding down operations and distributing all of its cash from the deal to the owners. If that's the case, it'll just be treated like any other distribution/dividend of a company to the owners of the business. If the company you are an owner of is a C corp that will owe taxes itself, then there will not be a full distribution of cash until all tax liability is settled (probably, this could be handled anyway the c-corp decided to handle it).

In all of this, no one will be withholding anything for your personal taxes. D Stanley covered most of the cases in which that would happen, which, I would agree, are limited if it's a US to US transaction. An additional case I know of is that interest/dividend payments sometimes withhold a portion of payments without a W-9 on file or if the taxpayer failed to declare all interest/dividends in the past.

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