A closely held corporation may be sold in a variety of ways. At one end of the spectrum is an all-cash sale. In such a transaction, the seller receives the purchase price and has no further concern with the economic well-being of the business. The difficulty with this method, of course, is finding a purchaser with sufficient cash who is willing to pay a fair price.
At the other end of the spectrum is a full-fledged bootstrap sale, where there is no down payment other than from the underlying assets of the sold corporation, and the purchaser's obligation to pay the purchase price over a period of years is dependent upon income generated by the underlying corporate assets and upon the assets themselves. Because of this dependency, a bootstrap seller remains vitally interested in the economic well-being of the corporation until the purchase price is fully paid.
Between these two extremes are sales where some down payment is made from independent sources, and the purchaser assumes personal liability for all or a portion of the purchase price. The significance of the· purchaser's assumption of personal liability naturally depends upon his financial affluence.
William H. Kinsey,
Bootstraps and Capital Gain--A Participant's View of Commissioner v. Clay Brown,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol64/iss4/2