A stock purchase – or membership interest purchase in the case of an LLC – is a business acquisition structure in which the buyer acquires ownership of the business entity itself, rather than selecting individual assets. The buyer steps into the shoes of the prior owner, and the business continues operating without interruption. Contracts, licenses, permits, and customer relationships that are tied to the entity remain in place without requiring individual assignments or third-party consents. For that reason, stock purchases can be operationally simpler and faster to close than asset deals.

The tradeoff is risk. When you buy the entity, you inherit its history – including liabilities that may not be fully visible during due diligence. Undisclosed debts, pending or threatened litigation, tax obligations, and contingent liabilities that have not yet materialized all become the buyer’s problem once the transaction closes. This is why representations and warranties in a stock purchase agreement are extensive and critically important – they are the seller’s formal statements about the condition of the business, and they form the basis for the buyer’s ability to seek recourse if something turns out to be materially different from what was disclosed.

Indemnification provisions, escrow arrangements, and survival periods are the mechanisms that give the buyer practical protection after closing in a stock deal. From the seller’s perspective, the goal is to limit post-closing liability through carefully defined indemnification caps, baskets, and survival periods that provide finality. From the buyer’s perspective, the goal is sufficient protection against the known and unknown risks of acquiring an entity with a history. Negotiating these provisions requires a transactional attorney who understands the structure of the deal, the risk profile of the business being acquired, and what is standard versus what is negotiable in South Florida’s lower middle market.