One of the final pieces of selling your business is signing off on the business purchase agreement. Once your buyer has worked through the due diligence process, their attorney will draft an agreement that will bind you and the buyer to the transfer of the business. In this quick guide, we’ll give you an overview of what you can expect to find in this important document.
What’s in the business purchase agreement?
The agreement (sometimes called a business sales agreement) will spell out the final purchase price for the business. It’ll also name every part of the business you’ll include in the transfer.
These items may include:
- Real estate
- Inventory
- Furniture and fixtures
- Equipment
- Vehicles
- Customer lists
- Marketing collateral
- Social media accounts
- Intellectual property, including patents and copyrights
- Goodwill
- Brand value
- Accounts receivable
- Accounts payable
- Working capital
The business purchase agreement should also address these terms:
- Will the sale be an asset or stock sale?
- What are the price and terms of the sale?
- Will the buyer use loans, cash, or seller financing to cover the costs of the purchase?
- Will there be a new lease, will leases be transferred, or will the site be subleased? If you’ve agreed to one of the last two options, be sure to state the rental rate and terms.
- Will training be included? If so, for how long and at what price?
- Will the buyer hire you as a contractor or employee after the sale?
- Will the buyer require a noncompete agreement?
- Which assets will be prorated at closing?
- Which contingencies must be put into place?
- How will you allocate the purchase price for tax purposes?
- What is the contract acceptance date?
- When will closing take place?
- Who will serve as the closing attorney?
- Who will cover specific closing costs?
Do I need to work with an attorney to create a business purchase agreement?
The buyer’s attorney typically draws up this document, but it’s very important to have your own lawyer review it for mistakes or ambiguities that could cause issues at the close of the sale.
Need help finding an attorney? Consider working with Contract Counsel. Check out their website here.
What’s next?
Log into your owner’s portal for articles and advice that’ll help you complete your sale and, if necessary, close your business entity (an important step for asset sales).
