PART 1 OF 3: The Two Structures and How They Differ

What you are actually buying in an asset deal versus an equity deal.

Nearly every healthcare acquisition begins with a threshold decision that shapes everything else: whether to buy the practice's assets or to buy the entity that owns them. The choice drives liability, taxes, and which contracts and licenses carry over. This article explains the two structures and the fundamental differences between them.

The asset purchase

In an asset purchase, the buyer acquires specific assets of the practice — equipment, goodwill, patient records, supplies, and selected contracts — and typically assumes only the liabilities it agrees to take on. The selling entity continues to exist after closing and generally retains liabilities that were not expressly assumed. Buyers often favor this structure precisely because it allows them to choose what they acquire and, within limits, to leave unwanted liabilities behind.

The stock or equity purchase

In a stock purchase (or, for an LLC, a membership interest purchase), the buyer acquires the ownership interests in the entity itself. The entity continues to operate, but under new ownership, carrying with it all of its assets and all of its liabilities — known and unknown, disclosed and undisclosed. The buyer steps into the seller's shoes, inheriting the entity's history along with its operations.

The central tradeoff: liability

The defining difference is how liability travels. In an asset deal, liability generally stays with the seller unless the buyer assumes it or an exception applies. In an equity deal, liability comes with the entity. For that reason, buyers frequently prefer asset deals and sellers frequently prefer equity deals — the structure allocates risk in opposite directions.

Successor liability is not absolute protection

The buyer's ability to avoid liability in an asset deal is real but not unlimited. Under successor liability doctrines, a buyer can inherit certain obligations despite an asset structure — for example, where the transaction is effectively a merger, where the buyer is a mere continuation of the seller, or where liabilities arise under specific statutes. In healthcare, certain regulatory and billing liabilities can follow the practice more readily than buyers expect.

Why the distinction is sharper in healthcare

Healthcare transactions add a regulatory layer that ordinary business sales lack. Licenses, provider enrollments, payer contracts, and ownership restrictions do not always transfer the way tangible assets do, and they often behave differently depending on which structure is used. Those healthcare-specific factors are the subject of the next article.

How West Coast Health Law Can Help

We advise healthcare buyers and sellers on transaction structure — explaining how each option allocates liability and risk, and which fits a particular deal.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every transaction is different; consult a qualified attorney about your specific situation.