When buying or selling a business, one of the key elements will be determining whether the deal should be structured as an asset sale or a share sale. These are quite different transactions, having advantages and disadvantages when compared with one another as well as profound implications for both the buyer and the seller. The determination of which is the most appropriate transaction will often depend on what the seller and buyer are looking to achieve, bearing in mind the varied financial consequences and risk profile that the parties are willing to assume.An asset sale is a transaction whereby the seller and the buyer agree on the sale and purchase of particular assets. The property being sold can be real (land) or personal (everything else), tangible (furniture, equipment, inventory, etc) or intangible (brand name, goodwill, contracts, etc) and existing property or future property (for example, in 1997 David Bowie sold off the future income stream attaching to anticipated royalty payments on his record sales).The flexibility of the seller and buyer to choose which assets (and liabilities, if any) are the subject of the sale is one of the principal advantages of such a transaction. Asset sales offer a great deal of flexibility and such a transaction allows for plenty of room for tailoring.By contrast, a share purchase involves the purchase of all the shares of the company (the purchase of the majority of shares of a company will be the topic of a future article). In such a purchase, as the expression goes, you buy the company, warts and all, which means that whatever the company owns (or owes!) is purchased. In effect, the buyer acquires the benefit, as well as the burden, of everything owned by that company. In a legal sense, the shareholder is not generally liable for the liabilities of the company; however, the financial burden can be considerably high if the shareholder must inject further capital.Whether buying assets or shares, it’s crucial that a buyer carries out proper and complete due diligence regarding what is being bought. The last result you’d want is to buy an asset only to then discover that there is a secured party who can lay claim to that property ahead of you — or discover that the wonderful business you just bought is actually saddled with debt.The due diligence exercise can be relatively simple or extraordinarily complicated under either structure, depending on the nature of the assets or the nature of the company’s business, how long it has existed, whether it has numerous current contracts, how long those contracts carry on, liabilities attaching to them, the existence of employees, etc.The best thing a prospective buyer can do before agreeing to anything is to do the necessary homework to understand what they want and compare that with what is being offered by a seller. If something does not make sense, don’t agree to it for fear of appearing ignorant — ask.Clearly, either structure can become complex and require considerable negotiation in order to arrive at the point where both parties are accomplishing what they set out to achieve.In Bermuda, under either structure, one has to consider other ‘hidden’ costs attaching to the transaction.While it is possible to legitimately structure transactions in a fashion that can reduce or defer stamp duty exposure, stamp duty is often payable — and can quickly reach frightening levels — so considerable care is needed to understand how and if that may play a part.Stamp duty arises when certain documents are signed — and the amount to be paid and when that is payable depends on the kind of document.Failure to pay the correct stamp duty and within the proper time required can result in the documents not being legally enforceable as well as being an expensive exercise to remedy once late payment penalties have been included.In all cases, you should resist pressure to sign something fast because the deal is so good it may not last. This can be the hallmark of a hasty and expensive mistake.Your lawyer may not be the first person you think of when you are considering the purchase or sale of a business — but it is always advisable to obtain legal advice before signing an agreement.Attorney Tiffany Boys is a member of the Banking & Asset Finance Practice Group at Appleby (Bermuda) Limited. A copy of this column is available on the firm’s web site at www.applebyglobal.com.This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.