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Asset Purchase Agreement: 7 Supplemental Documents When Buying A Business

By Business Contracts, Business Lawyer

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.

How to become an Internet Business Broker

By Internet Lawyer
internet business broker

Are you ready to be an Internet business broker?

Being an Internet business broker is similar to working as a real estate broker with a few important exceptions.

As an online business broker, you represent either the seller or purchaser (usually the seller) of an Internet business and typically get paid a percentage of the sale price at closing…or in installments if the total amount is spread out in multiple payments over a period of time.

Note that this is not domain flipping or speculation. An Internet business broker represents real online businesses rather than someone who has registered a domain name that may have value in the marketplace.

Should an online business broker represent both parties?

In rare instances, an Internet business broker can represent the transaction rather than the seller or purchasers.

Although it is possible in some places to represent both the seller and buyer, this is not a good idea and a recipe for a lawsuit if one party thinks you have favored the other party during the transaction.

A good rule of thumb is to represent one party (usually the seller) and make it clear who you represent so there’s no confusion.

Is being an Internet business broker like being a real estate broker?

One of the key differences between being an Internet business broker and a real estate broker is that an online business that doesn’t involve real estate isn’t subject to the same educational and licensing requirements for being a real estate broker.

Although there may be business broker licensing requirements (depending upon your location), they’re rarely as stringent as those required for brokers who help buyers and sellers of real estate.

It’s also important to note that an online business broker can’t tread into the territory of unauthorized practice of law. Many brokers retain a qualified Internet business lawyer to draft legal documents that they re-use in most transactions and consult the attorney on an as-needed basis for customization.

Your broker agreement

Assuming you want to get paid for your services, you will also want your Internet attorney to create an online business broker agreement that you will have the party you represent (seller or buyer) sign that states how much you get paid and when as part of putting together the deal.

This agreement will also define key other terms, such as the scope of the services you are going to provide in exchange for the commission. For example, how much marketing you will be doing, whether you will be involved in handling any escrow of funds, and whether your services include business valuation.

It’s dangerous to rely upon a verbal agreement or exchange of emails that can be misconstrued. In many cases, this means you won’t get paid your broker’s commission. Instead, you will want to have a signed broker agreement in place as a binding contract to protect your interests.

If you’re interested in having Internet Lawyer Mike Young prepare a broker agreement for you to use, simply schedule a phone consultation to get started.