After you’ve sourced a business, evaluated its viability, and negotiated its terms, your attorney will draft a sales agreement that will bind you and the seller to the transfer of the business. In this quick guide, we'll give you an overview of what you can expect to find in your sales agreement.
What are the sales agreement terms and conditions?
The agreement will specify the final purchase price for the business. It'll also define every part of the business the seller will 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
Your sales agreement should also address these terms and conditions:
- Will the sale be an asset or stock sale?
- What are the price and terms of the sale?
- Will you 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 opted for 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 you hire the seller as a contractor or employee after the sale?
- Will you 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 on this step?
It's best to work with an attorney on this step. The main reason is that an attorney can ensure that there are no ambiguities in the contract that could cause issues at the close of the sale.
Still, many business buyers take the DIY route on this step. They turn to legal sites offering templates that have been drafted and reviewed by attorneys, which are robust enough to help many buyers avoid complications later in the sale. We like LawDepot’s sales agreement for many simple business transfers.
However, if your sale or the terms you plan to offer are nonstandard, you should consider working with an attorney to ensure you present a complete and infallible sales agreement.
If you work with an attorney, be sure to review the agreement they create. Make sure you feel comfortable with the terms. Then, sign the agreement and return it to your attorney, who will present the agreement to the seller to review and sign.
Need help finding an attorney? Consider working with Contract Counsel. Check out their website here.
What's next?
With the formal sales agreement in place, you are ready for the next phase of the acquisition process, securing the capital you need to buy the business.
Log into your owner’s portal for articles and advice that’ll help you close on your new business and prepare for the challenges of ownership and operations.
