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Home Q&A Forum How does an asset purchase agreement work with debt?
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Corporate

Asset Purchase Agreement

Texas

Asked on Oct 4, 2022

How does an asset purchase agreement work with debt?

I am buying a business and want to use an asset purchase agreement based on what I've read, but I believe the company has debt. How does this work? Will I also be buying the debt? Any help is appreciated

2 Attorney answers

Answer

Corporate

Texas

Answered 716 days ago

Michael S.

ContractsCounsel verified

Business Lawyer
Licensed in Pennsylvania
Free Consultation

Good morning. With the caveat that I am a Pennsylvania attorney, as the buyer, you do want to buy the assets and not the company. The drafting of the purchase agreement is critical, ensuring that you are not responsible for existing debt. You will also want to obtain an indemnification from the seller, to make sure you are protected in case any of the creditors come after you. Obviously, the details of the deal may complicate things, but that is the gist.

Use of the ContractsCounsel Q&A Forum does not create an attorney-client relationship between User and any Lawyer User. The Forum is not a substitute for legal advice from a lawyer but is intended to be educational and to help the user determine if legal services are necessary. The Forum, Content, and communications on the Forum do not constitute legal advice.

Answer

Acquisitions

Texas

Answered 716 days ago

Steven C.

ContractsCounsel verified

Business Lawyer
Licensed in Louisiana, Texas
Free Consultation

It depends. If you want to use an asset purchase agreement to purchase just the assets of the company instead of the entire company, then an asset purchase agreement is the way to go as you could avoid taking on the company's existing debts. However, if you plan to buy the business as a whole I would expect you will inherit the debts as well unless you draft a release from the former owners.

Use of the ContractsCounsel Q&A Forum does not create an attorney-client relationship between User and any Lawyer User. The Forum is not a substitute for legal advice from a lawyer but is intended to be educational and to help the user determine if legal services are necessary. The Forum, Content, and communications on the Forum do not constitute legal advice.
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