What is a Business Purchase Agreement Drafting?
A business purchase agreement is legally-binding document that transfers the ownership of a business from a seller to a buyer.
Once the parties have signed a letter of intent, they will usually move on to writing a business purchase agreement. This document must outline all the important terms related to the transfer, such as payment and legal compliance. It should be detailed and legally sound so that it’s enforceable.
Read the rest of this article to explore what’s typically included in a business purchase agreement, how to draft it, and how a lawyer can help you with the process.
What are Key Terms in a Business Purchase Agreement?
A business purchase agreement usually contains the following core components:
- Business description. A detailed description of the business that’s being sold, such as its location and goods/services, should be included.
- Assets. These refer to the assets included or excluded from the business sale, such as machinery or fixtures.
- Transition duties. These come into play after the transaction. Both parties should agree on their duties, such as who will be responsible for training new employees.
- Payment. This is the price the buyer will pay, with information about how the payment(s) will be made.
- Restrictive clauses. This prohibits a party from conducting certain activities. For example, the seller might not be allowed to solicit the company’s customers or compete with the company.
- Warranties. These are the guarantees the seller makes about the business or its assets. If these are later found to be untrue, the buyer can claim for damages.
- Confidentiality. Since sensitive business information will be exchanged during the sale, this clause serves to protect it.
- Closing. This section of the agreement lists the date and time of closing and should include what payments need to be made when closing.
What are Tips for Drafting a Business Purchase Agreement?
Although you might have all the key components you need in your business purchase agreement, you should consider some additional tips when drafting this contract to protect your interests and ensure clarity.
Include an Employee Clause
If employees will be transferred with the business, there should be confirmation that all required processes have been completed. For example, the seller should guarantee that they have complied with all legal obligations and all employee payments are up to date at the time of transfer completion.
Discuss Debts
There could be debts that get transferred along with the assets, so you don’t want to forget about them. You’ll have to agree on who’s responsible for the debts, but as a buyer you could negotiate a lower purchase price to compensate for the inherited liabilities.
Be Thorough About Payments
The payment terms should clearly specify the total price, which should include fees and taxes, and the payment method. For example, if it’s a lump sum or made in installments. Payment due dates and penalties for missing them must be detailed.
As a seller, you might want to include a security deposit, which is typically a percentage of the purchase price. This shows that the buyer is serious about the purchase.
Mention Conditions
To protect your interests, you should mention certain conditions that must be met prior to the transfer. These can include financial approvals or inspections. Think about conducting due diligence so that there are no hidden risks.
Explain the Transfer Process
How the business will be transferred must be outlined clearly, such as how assets are handed over to the buyer and how customers will be affected by the process.
How Can a Lawyer Help You with Business Purchase Agreement Drafting?
Since a business purchase agreement needs to cover a range of aspects of the transfer, it can help you to work with a qualified lawyer when drafting it.
A lawyer will help you in the following ways:
- They’ll avoid making mistakes that can cost you. A prime example is paying penalties for not following regulatory requirements.
- They'll conduct due diligence to reduce your legal and financial risks.
- They'll negotiate terms on your behalf, ensuring the agreement is fair.
- They’ll draft clear, specific terms so that both parties have clarity about the agreement.
- They’ll align the business purchase agreement with other documents, such as a letter of intent.
- They’ll ensure that both the agreement and transfer are compliant with all federal and state laws.
- They’ll explain all duties and rights to help you navigate the transfer with peace of mind.
- They’ll include additional information that you might not consider, such as dispute-resolution methods in case future disagreements arise.
- They’ll prepare all the important documents you need for closing the sale properly.
Where to Find a Lawyer for a Business Purchase Agreement Drafting
Hiring a reputable lawyer doesn’t have to take a lot of time or cause you stress. You can find an experienced, qualified lawyer on an online legal platform such as ContractsCounsel.
ContractsCounsel is one of the largest online legal marketplaces where you get access to a curated network of vetted lawyers who can help you with your legal requirements, such as drafting your business contracts.
If you need to request that a lawyer draft a business purchase agreement, all you have to do is follow these five easy steps:
1. Go to the ContractsCounsel marketplace, where you can post your project for free.
2. Include a few details, such as the type of business you’re selling or purchasing, so that lawyers will be better informed.
3. Wait for lawyer bids. You’ll receive multiple bids from lawyers directly on the platform who can assist you.
4. Once you receive the lawyer bids, you should review the lawyers' profiles. There’s lots of info on the platform to help you choose the best lawyer, such as their location, client ratings, years of experience, and field of expertise.
5. Connect with a lawyer you think is best suited to your requirements and hire them to draft your business purchase agreement.
