A buyer agrees to purchase a commercial building. The price is settled, the inspection is clean, and then, somewhere near the letter of intent, the seller's broker mentions that the sale will be structured as an entity purchase: the buyer will acquire the LLC that owns the building, not the building itself. It sounds like a technicality, a preference of the seller's accountant. It is not. It is the single decision that most shapes what the buyer is actually buying, and it is being made in a sentence, at the moment it deserves the most attention.
Commercial property can change hands two ways. In an asset deal, the buyer purchases the real estate directly. In an entity deal, the buyer purchases the ownership interests in the company that holds the real estate, almost always an LLC. The building is the same either way. Everything around it, the liabilities that come along, the diligence that is required, the financing, and the tax basis, is different. This is how to tell which deal you are in, and why the difference is worth deciding on purpose.
What you are really buying
An asset deal is close to what a buyer imagines when they picture buying a property. You take title to the real estate, you get a fresh title policy, and you generally leave the seller's company, and its history, behind. The seller's debts, its contracts, its lawsuits, and its tax past stay with the seller, because you did not buy the seller. You bought the dirt and the improvements.
An entity deal is different in kind, not degree. When you buy the LLC, you buy all of it: the property, yes, but also every obligation and exposure the entity carries. Its existing loan, its leases and service contracts, any litigation, any unpaid taxes, any environmental history, and any liability no one has discovered yet all come with the membership interests. The leases and permits stay in place without reassignment, which is sometimes the point of doing it this way. But the buyer steps into the entity's shoes completely, and those shoes may have things in them.
That single distinction drives the rest of the analysis.
Why sellers ask for an entity deal, and why Texas changes the math
In much of the country, sellers push for entity deals to avoid real estate transfer taxes and to escape a sale-triggered reassessment of the property's tax value. Those pressures are real elsewhere, and they lead buyers to accept entity deals they might otherwise resist.
Current as of July 2026. Texas removes two of those reasons. Texas imposes no state real estate transfer tax, and it does not reassess a property's value simply because it sold. So the classic out-of-state case for an entity deal, avoiding a transfer-tax hit or a reassessment spike, largely does not apply here. In Texas, the real reasons to consider an entity deal are narrower and more specific: keeping an existing, favorably priced loan in place, or transferring leases and permits without the friction of reassignment. Those can be good reasons. But they should be weighed against the liability a buyer inherits, not assumed, and a seller who leads with "it is just cleaner this way" is usually describing what is cleaner for the seller.
The diligence is a different exercise
Because the two deals transfer different things, they require different diligence, and treating an entity deal like an asset deal is where buyers get hurt.
In an asset deal, diligence is about the property: title and survey, environmental condition, the leases and their estoppels, and the physical building. In an entity deal, all of that still matters, and then a second layer is added, because you are buying a company. That layer includes the entity's debt and whether its loan even permits a change of control, its litigation and judgment history, its tax filings, its corporate records and operating agreement, and the universe of liabilities that a property inspection would never surface. The protection for what diligence cannot find is contractual: strong representations and warranties from the seller, an indemnity that survives the closing, and an escrow or holdback that gives those promises something to reach if a hidden liability appears.
Financing and basis follow the structure
Two more consequences track the choice. On financing, an entity deal can sometimes preserve an existing loan, which is attractive when that loan is cheaper than today's market, but most commercial loan documents restrict transfers of ownership, so "keeping the loan" often requires the lender's consent and is not the buyer's decision to make alone. An asset deal generally means new financing, with its own closing requirements. On tax basis, the structure affects whether the buyer takes a fresh basis in the property or inherits the entity's existing, often lower, basis, which has real consequences for depreciation and future gain. That analysis belongs with your tax advisor before the structure is fixed, not after.
Protecting yourself when it is an entity deal
When an entity deal is genuinely the right structure, the buyer's protection is contractual, and it is worth insisting on. Because you are inheriting the entity's whole history, you want the seller's representations and warranties about that history to survive the closing rather than expire at it, an indemnity that backs those representations, and an escrow or holdback that gives the indemnity something real to reach if a hidden liability surfaces later. A specific indemnity for pre-closing taxes and for any known problem area, sitting on top of the general one, is common and reasonable. None of this is exotic, and a seller acting in good faith should not resist the basic architecture of it. Its absence is itself information: a seller unwilling to stand behind the entity's past may be telling you something about that past.
The decision belongs at the letter of intent
Asset or entity is not a closing detail. It sets the diligence you must run, the price you should pay, the risk you are accepting, and the protections you need to negotiate, and each of those is far easier to shape before the letter of intent commits you than after. A buyer who understands which deal they are in can price the liability, scope the diligence, and demand the reps, indemnity, and escrow that the structure calls for. A buyer who signs first and learns later is negotiating from behind.
If you are buying commercial property, the most valuable question to answer early is the plainest one: am I buying the building, or am I buying the company that owns it, and have I priced the difference.
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This material is for general information only and is not legal advice; reading it does not create an attorney-client relationship. References to Texas law are stated at the level of principle and current as of the date shown; the law may change, and tax treatment is fact-specific and not addressed here as advice. Have your specific transaction reviewed by counsel and your tax advisor.