To transfer assets from one company to another, you inventory and value what’s moving, choose the legal structure that fits the relationship between the two companies (an asset sale, a Section 351 capital contribution, or a statutory merger), execute the specific transfer document each asset class requires, and clear the tax, employment, and regulatory obligations that attach to the deal. The structure decision drives everything else: it determines which documents you sign, how the IRS taxes the transaction, and whether liabilities travel with the assets or stay behind.
What to Nail Down Before Anything Moves
Inventory and Value Every Asset
Build a detailed schedule of what’s being transferred. Tangible property (machinery, vehicles, real estate) takes different documents than intangibles like patents, trademarks, and customer contracts. Financial assets such as accounts receivable get listed at book value as of the transfer date. Grouping by category now saves days of work when the closing checklist gets built.
Each asset needs a fair market value. This matters for financial reporting and it matters more for the IRS, which watches intercompany transfers closely for income shifting between related entities. On any significant transfer, an independent third-party appraisal is worth what it costs. It creates a defensible record if values are later challenged, and it fixes the gain or loss each side will recognize.
Board and Shareholder Approvals
Both companies need formal board approval before assets move. Each board should adopt a resolution identifying the specific assets, the consideration, and the key terms, then record it in the corporate minutes and authorize named officers to sign.
Shareholders get a vote when the selling company is parting with enough that it would no longer have a meaningful ongoing business. There’s no universal percentage. Under the widely adopted model statute, a company is conclusively deemed to still have a significant continuing business if it keeps at least 25 percent of its total assets and at least 25 percent of either its pre-tax income or revenue. Fall below both prongs and a shareholder vote is required, usually a majority of shares entitled to vote. State law controls, so check the governing corporation statute for each entity.
Liens, Contracts, and Consents
Run a UCC search before closing to surface any security interests attached to what you’re moving. A lender with a perfected lien on the equipment or inventory must either consent to the transfer or release the lien. Transferring collateral without the secured party’s approval is typically a default under the loan agreement.
Every contract, license, and lease tied to the assets needs a read for anti-assignment language. Many commercial agreements prohibit transferring rights without written consent from the other party. Ignore the clause and the assignment is voidable, plus you’ve handed the counterparty a breach claim. Line up consents early. Counterparties who realize they hold leverage often use it to renegotiate.
Environmental Review for Real Property
Real estate in the deal means environmental liability gets its own workstream. Under CERCLA, the current owner of contaminated property can be held strictly liable for cleanup costs regardless of who caused the contamination. The liability follows the land. A buyer who skips environmental review can inherit a cleanup obligation worth more than the property.
The defense is bona fide prospective purchaser status, which requires “all appropriate inquiries” before acquisition. Practically, that means a Phase I Environmental Site Assessment meeting the current ASTM E1527-21 standard. If contamination shows up, the buyer has to take reasonable steps to prevent any continuing release. Skip the assessment and the defense goes away.
Pick the Legal Structure
The structure controls documents, taxes, and whether liabilities come along.
Asset Sale
The buyer picks specific assets and pays for them. The seller keeps everything not listed, including undisclosed liabilities. This is the standard structure when the buyer wants only part of a business or the companies are unrelated. Post-closing integration is cleaner because the buyer knows exactly what it took on and left problematic contracts or contingent liabilities behind.
The cost is documentation volume. Every asset class needs its own transfer instrument, every contract needs a separate assignment, and every lien needs a release. For a sizable operating division, the closing checklist can run dozens of pages.
Section 351 Capital Contribution
When a parent transfers assets to a controlled subsidiary, the transaction is usually structured as a capital contribution rather than a sale. The parent puts assets in and receives additional stock or an increase in investment basis. No cash moves. This is how corporate families fund new subsidiaries or consolidate assets internally.
Under IRC Section 351, no gain or loss is recognized if the transferor receives only stock and controls the receiving corporation immediately after the exchange. Control here means at least 80 percent of total voting power and at least 80 percent of every other class of stock. Assets carry over at the same tax basis they had in the parent’s hands, and tax on any built-in gain is deferred until the stock or the underlying assets are eventually sold.
Statutory Merger or Consolidation
A merger transfers everything by operation of law. The surviving company automatically acquires all assets and assumes all liabilities of the merged entity, no individual bills of sale, deeds, or assignments required. A consolidation works the same way but creates a new entity from two or more predecessors.
This fits when the point is to combine entire businesses, contracts and obligations included. The trade-off is that the surviving entity inherits everything, known and unknown. State law sets the procedure: board resolutions, shareholder votes at each participating company, and a certificate of merger filed with the Secretary of State.
How to Choose
Three factors usually decide it. The relationship between the parties comes first: unrelated companies almost always use an asset sale or merger, while transfers inside a corporate family lean toward a Section 351 contribution. Liability appetite comes next: an asset sale lets the buyer cherry-pick and leave undisclosed obligations, while a merger forces the survivor to take everything. Tax objectives round it out: a taxable asset sale gives the buyer a stepped-up basis that supports higher depreciation deductions, while Section 351 preserves the existing basis and defers gain. These pull in different directions, which is why the structure fight is often the most contested part of the deal.
Documents That Actually Move Each Asset
Bills of Sale, Deeds, and Assignments
Tangible personal property (equipment, furniture, inventory) transfers by bill of sale. Itemize the property in enough detail to identify each item, and have authorized representatives of both companies sign.
Real property requires a deed. It must be notarized and recorded in the county land records office where the property sits. Recording fees run roughly $50 to $150 depending on document length and local fee schedules.
Intangibles and contractual rights transfer through an assignment and assumption agreement. The document assigns the rights and, critically, includes the receiving company’s explicit assumption of the corresponding obligations. Without that assumption language, the transferring company stays on the hook to the counterparty even after the assignment.
Government Filings for IP and Titled Assets
Certain assets need a specific government filing to make the ownership change effective against third parties. Patent assignments get recorded with the USPTO’s Assignment Recordation Branch through the Assignment Center portal. Trademark assignments use the same system. Both filings create a public record of the ownership change and should be handled promptly after closing.
Copyright transfers should be recorded with the U.S. Copyright Office. Under federal law, recordation provides constructive notice of the transfer, but only if the document identifies the specific work and the work has been registered. Without recordation, a later buyer who doesn’t know about the transfer could claim priority.
Vehicles and other titled assets require updating title and registration with the relevant state motor vehicle agency, which often triggers state sales or use tax based on the vehicle’s value. Securities such as stock in a closely held corporation move by updating the issuing company’s stock ledger: the old certificate is canceled and a new one is issued in the receiving company’s name.
Assignment vs. Novation
The default mechanism for moving a contract in an asset sale is assignment. An assignment moves the transferring company’s rights, but it does not release the original party from its obligations. If the buyer later fails to perform, the transferring company is still liable to the counterparty. Most sellers don’t realize this until a problem surfaces.
A novation goes further. It substitutes the buyer for the original party entirely, extinguishing the old contract and creating a new one between the buyer and the counterparty. The original party walks away with no continuing liability. Because a novation changes the counterparty’s rights, the counterparty has to consent affirmatively. For critical contracts where lingering liability would be unacceptable, push for a novation even though it takes more negotiation.
Notify the Right Third Parties
Contracts, leases, and customer relationships usually require formal notice to the parties affected. Customers and vendors whose agreements are being assigned should receive written notice identifying the effective date and the new entity responsible for performance. Landlords (and tenants, where applicable) need notice when a leasehold changes hands.
A handful of states still enforce bulk sales notification laws derived from UCC Article 6. Where they apply, the buyer of business assets outside the ordinary course must notify the state tax authority in advance of the sale, typically at least 10 business days before closing. Miss the notice and the buyer can become personally liable for the seller’s outstanding tax obligations. Most states have repealed their bulk sales statutes, but the ones that remain impose real consequences. Check every state where the assets sit.
Tax Consequences to Plan Around
Taxable Asset Sales
In a taxable asset sale, the seller recognizes gain or loss equal to the difference between the sale price and the adjusted tax basis of each asset. The sale price gets allocated among the assets under the residual method required by IRC Section 1060, which assigns value first to cash and cash equivalents, then to progressively less liquid asset classes, with anything left attributed to goodwill and going concern value.
Character depends on the asset. Property held more than a year generally qualifies for lower long-term capital gains rates. Inventory and accounts receivable produce ordinary income regardless of holding period. Both buyer and seller file IRS Form 8594 (Asset Acquisition Statement) with their tax returns, reporting the agreed allocation. A written allocation binds both sides.
The buyer’s payoff is a stepped-up basis, set at the purchase price allocated to each item. That higher basis produces larger depreciation and amortization deductions over the remaining useful life of each asset, which can meaningfully reduce the buyer’s taxable income in the years after closing.
Tax-Free Transfers Under Section 351
Assets contributed to a corporation in exchange for stock can qualify as a tax-free exchange under IRC Section 351. No gain or loss is recognized if the transferor receives only stock and controls the receiving corporation immediately after: at least 80 percent of total combined voting power and at least 80 percent of every other class of stock.
The receiving corporation takes a carryover basis, keeping whatever basis the assets had in the transferor’s hands. That preserves the existing depreciation schedule but forgoes the stepped-up basis a buyer would get in a taxable sale. The transferor’s gain is deferred, not eliminated. Tax comes due when the stock is sold or the receiving corporation sells the underlying assets.
If the transferor gets anything besides stock (cash, debt instruments, other property, collectively called “boot”), gain is recognized to the extent of the boot received. Even a small amount can partially undo the tax-free treatment, which is why avoiding boot is a priority in most internal reorganizations.
State and Local Transfer Taxes
Real estate transfers usually trigger a state or county transfer tax calculated as a percentage of fair market value. Rates and exemptions vary widely. Tangible personal property may also be subject to state sales or use tax. Some states exempt bulk transfers of an entire business segment; some don’t. If the seller doesn’t collect sales tax, the buyer is on the hook for use tax on the purchase price. Review the rules in every state where the assets are physically located.
Successor Liability for Unpaid Taxes
In a pure asset sale, the buyer is generally insulated from the seller’s pre-closing tax liabilities because the purchase agreement defines which liabilities transfer. A statutory merger automatically passes all tax liabilities to the survivor, including exposures from prior audits and unreported positions.
Even in an asset sale, many states impose successor liability for state-level taxes like sales tax and employment tax. These laws require the buyer to hold back enough of the purchase price to cover the seller’s outstanding obligations until the seller produces a tax clearance certificate from the state tax authority. Without the certificate, the buyer can be held liable for the seller’s unpaid taxes up to the full value of the assets transferred. Releasing the entire purchase price at closing without clearance is a real financial risk.
Employees Come With the Assets
When an operating business is involved, employee obligations catch buyers off guard more than any other area.
WARN Act Notice
The federal Worker Adjustment and Retraining Notification Act requires employers with 100 or more employees to give at least 60 calendar days’ written notice before a plant closing or mass layoff. A plant closing triggers notice when 50 or more employees lose their jobs at a single site. A mass layoff triggers it when at least 50 employees (representing at least one-third of the workforce at that site) are laid off, or when 500 or more employees are affected regardless of percentage.
If the buyer doesn’t hire the seller’s workforce, WARN compliance falls on the seller. If the buyer hires some but not all, the combined actions can trigger WARN obligations for one or both parties. Several states have mini-WARN statutes with lower thresholds and longer notice periods, so check state law independently.
COBRA Coverage
Health insurance continuation under COBRA follows specific rules in asset sales. If the seller keeps a group health plan going after closing, the seller’s plan keeps the COBRA obligation for affected employees and their dependents. The parties can contractually allocate this, but if whoever’s contractually assigned fails to perform, the obligation reverts to whichever party the law designates.
The critical scenario is when the seller drops any group health plan in connection with the sale. If the buyer then continues the seller’s business operations without substantial interruption, the buyer becomes a successor employer and its group health plan has to offer COBRA to affected individuals. The buyer’s obligation starts on the later of the date the seller’s plan terminates or the closing date.
Unemployment Insurance Experience Ratings
State unemployment insurance tax rates are based on each employer’s claims history. Federal law requires that when a business transfers between employers with substantially common ownership, management, or control, the experience rating goes with the business. That stops companies from shedding a bad claims history through internal restructuring.
States are also required to block experience rating transfers where someone acquires a business primarily to obtain the seller’s lower unemployment tax rate. This anti-abuse rule, aimed at “SUTA dumping,” carries civil and criminal penalties. In arm’s-length sales between unrelated parties, the buyer typically starts at the state’s new-employer rate rather than inheriting the seller’s rating, though rules vary.
Successor Liability for Wage Claims
Federal courts in several circuits have held that a buyer in an asset sale can be liable for the seller’s unpaid wages and overtime claims under the Fair Labor Standards Act, even when the purchase agreement expressly disclaims those liabilities. Courts look at continuity of operations and workforce, whether the buyer had notice of the claims, and whether the seller can satisfy the obligations on its own. Wage and hour due diligence before closing is not optional, even in a clean asset purchase.
Antitrust Clearance for Large Deals
Large transfers may require premerger notification under the Hart-Scott-Rodino Act before closing. For 2026, the minimum reporting threshold is $133.9 million in transaction value. Above that, additional size-of-person tests may apply depending on the parties’ annual revenue and total assets. Transactions valued at $267.8 million or more are reportable regardless of the parties’ size.
Filing fees scale with transaction size. For 2026, they run from $35,000 at the low end (transactions under $189.6 million) up to $2,460,000 for transactions of $5.869 billion or more, with tiers at $110,000, $275,000, $440,000, and $875,000 in between.
After filing, the parties observe a 30-day waiting period before closing. The FTC or DOJ can extend it by issuing a “second request” for additional information, which in practice can push closing out by months. Closing before the waiting period expires is a federal violation with significant penalties. For any transaction approaching the $133.9 million threshold, fold HSR analysis into the deal timeline early.