Asset Purchase Agreement: 7 Supplemental Documents When Buying A Business

Asset Purchase Agreement: 7 Supplemental Documents When Buying A BusinessAlthough an asset purchase agreement plays a vital role when buying a business’ assets, there are other important legal documents used in the transaction to ensure that you get what you want from the deal whether you’re the buyer or the seller.

Common Documents For Buying A Business’ Assets

Here are 7 documents an experienced business contracts attorney will frequently use to protect clients for business asset acquisitions.

1. Letter of Intent (LOI) – The LOI is a broad overview or outline of the proposed transaction. If there’s agreement on the LOI’s terms and conditions, an asset purchase agreement will flesh out the details after due diligence is performed.

2. Bill of Sale – A bill of sale is commonly used for transfer of business assets that aren’t real estate.

3. Intellectual Property (IP) Assignments – This type of legal document is used to assign ownership of patents, trademarks, and copyrights from seller to buyer. In some instances, a license may be used instead where the seller retains IP ownership. Or, the seller as an IP licensee may transfer its license to the buyer.

4. Memorandum of Asset Purchase – A memo is a great way to identify that an asset purchase has occurred without going into detail. The memo can be used with third parties while maintaining confidentiality for important terms and conditions (e.g. price) found within the asset purchase agreement.

Related Article: Asset Purchase vs Stock Purchase – How To Buy A Company

5. Escrow Agreement – This agreement covers escrow services that protect both parties to the transaction, reducing the risk buyer won’t receive the assets or that seller gets stiffed on payment when transferring the assets. For the sale of Internet businesses, Escrow.com is a popular escrow service.

6. Business Broker Agreement – Although it’s more common for the seller to have a business broker (who lists and promotes the sale of the company), you’ll also find brokers who represent a buyer in these transactions. Regardless of which party is being represented, the broker’s agreement will describe the terms of representation, including when and how the broker gets paid when the business is sold (either as an asset or equity transaction).

7. Seller Consulting or Employment Agreement – Frequently, the seller will stay on for a period of time after closing occurs. If it’s an active role for more than a month, the seller will often sign a contract that describes the seller’s post-closing rights and responsibilities either as an employee or independent contractor consultant for the business.

Related Article: Sell An Internet Business – 5 Expensive Mistakes to Avoid

Of course, there are other legal documents that are used when business assets are purchased because each deal has unique characteristics. For example, if there’s seller financing, there may be a promissory note reflecting the buyer’s debt and the payments to be made.

Where to get an asset purchase agreement and related legal documents

Whether you’re buying a company’s equity or its assets, Business Lawyer Mike Young may be able to help you get the deal done right.

Author Mike Young, Esq.

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