Once the preferred exit option is selected, the transaction team defines the “preferred” structure for the exit. The word “preferred” is used because the final transaction structure is the result of negotiations with the buyer. The transaction team, however, should start with a clear understanding of what is important to the entrepreneur and where there is room for negotiation. In broad terms, transactions are structured as either an “asset sale” or a “stock sale.” The proceeds of the transaction can be packaged in numerous ways, each carrying tax and future risk implications: cash, stock, seller notes, warrants, earn outs, non-competes, royalties, etc. What benefits the seller may be detrimental to the buyer, so understanding the impact on each party’s position and reaching middle ground across a myriad of points – many of which are quite technical in nature – is what gets hammered out negotiating the purchase agreement.