The buyer acquires the company itself by buying its shares, so contracts, employees and liabilities move with it. Usually simpler for the seller and the outcome most founders expect.
Why it matters
A share purchase is the deal structure most founders picture when they imagine "selling the
company" — the buyer takes over the legal entity itself, and everything inside it comes along:
customers, contracts, employment agreements, the lease, the tax history, and the liabilities
nobody has found yet. For the seller, that is the appeal. Ownership changes hands in one step, and
what the entity owed or promised before closing is now the buyer's problem to manage, not a debt
the founder keeps carrying afterward.
For the buyer, that same completeness is the risk. Buying the shares means buying the company as
it actually is, warts included, rather than the parts that were chosen in advance. That is the
entire reason asset purchases exist as an alternative, and why the
choice between the two is one of the first structural questions a term sheet has to settle.
How it works
Legally, a share purchase is simple: the seller's shares change hands for the agreed price, and
the buyer now owns the entity — every contract, every employee, every liability, disclosed or
not. That simplicity is precisely why so much of the negotiation moves elsewhere: into the
representations and warranties the seller gives about the state of the business, the
disclosure schedule that lists the known exceptions, and the SPA
itself, which is where those promises get written down with consequences attached if they turn
out to be false.
Because the buyer inherits history it cannot fully verify in the time available, a share purchase
is usually where an escrow or a holdback shows up: a slice of the price held
back for a period, so a warranty breach discovered after closing has something to be paid out of
rather than a lawsuit to be filed.
Questions people ask
- What is the main difference between a share purchase and an asset purchase?
- A share purchase transfers the whole company, including every contract and liability, known or not. An asset purchase transfers only the chosen assets, letting the buyer leave unwanted liabilities behind. That single difference is why sellers usually prefer a share purchase and buyers sometimes push for the other structure.
- Why do sellers usually prefer a share purchase over an asset purchase?
- Because it is cleaner for them: the company changes hands as a whole, contracts and employment relationships continue automatically, and liabilities that arose before closing move to the buyer along with everything else, rather than staying behind with the seller after the sale is done.
- Does a share purchase still need seller warranties?
- Yes, and they matter more here than in an asset purchase, because the buyer is taking on the whole entity sight-unseen in some respects. The warranties and the disclosure schedule are how the buyer prices and limits that risk, and they are usually backed by an escrow or holdback against the price.
See also
More in Deal structure
- Asset purchase — The buyer acquires chosen assets — code, customers, brand, sometimes staff — rather than the company.
- Cap table — The register of who owns what: shares, options, convertibles and the terms attached to each.
- Earnout — Part of the price paid later, only if the business hits agreed targets.
- Escrow — Part of the price held by a neutral third party for an agreed period, available to the buyer if the seller’s promises turn out to be wrong.
- Liquidation preference — The right of certain investors to be paid before ordinary shareholders when the company is sold.
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Updated 2026-09-09