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A Purchase of Business Agreement is a legal document that summarizes the provisions of the sale of a business from one person to another. This agreement, commonly known as a Sale of Business Agreement or Business Sale Agreement, is generally used when a business owner is selling their company to another person or entity and covers matters such as the payment terms, purchase price, and any prerequisites or contingencies that must be fulfilled before the sale can be concluded.
Important Elements of a Purchase of Business Agreement
A Purchase of Business Agreement is a legally binding document that establishes the terms and conditions of the sale of a business. Once both parties sign the agreement, they must abide by its terms. If either party fails to fulfill their obligations under the agreement, they may face legal consequences.
In addition, it is essential to note that a Purchase of Business Agreement is a complex legal document that necessitates the expertise of an experienced attorney. Both parties should seek the advice of an attorney before signing the agreement to ensure that they fully comprehend its terms and implications. And a purchase of business Agreement typically consists of the following sections:
- Identification of the Involved Parties: This section identifies the buyer, the seller, and any other individuals or entities involved in the transaction, such as attorneys or brokers.
- Description of the Business: This section provides a detailed account of the business being sold, including its assets, liabilities, and any intellectual property associated with it.
- Purchase Price: This section outlines the purchase price for the business and how it will be paid, including any financing arrangements or installment payments.
- Due Diligence: This section outlines the buyer's right to conduct due diligence on the business to ensure they are fully informed about its financial and operational status.
- Representations and Warranties: This section contains statements the seller makes about the business, including its financial status, legal compliance, and other crucial information that may impact the sale.
- Conditions Precedent: This section outlines any prerequisites that must be fulfilled before the sale can be completed, such as obtaining necessary permits or approvals.
- Closing: This section describes the sale's closing process, including the transfer of ownership and any necessary legal documentation.
Importance of a Purchase of Business Agreement
The Purchase of Business Agreement (PBA) plays a critical role in business transactions by establishing the expectations and obligations of both parties. It is essential to ensure that both the buyer and seller are protected, and the purchase of business agreement achieves this through various means. Below are some reasons a purchase of business agreement is important.
- Protection for Buyer and Seller: The purchase of business agreement protects both the buyer and seller by defining the terms and conditions of the sale. It includes outlining the purchase price, payment terms, and any warranties or representations the seller makes. By clearly stating these terms, both parties fully understand the transaction's expectations and obligations.
- Transfer of Ownership: The purchase of business agreement facilitates the transfer of ownership from the seller to the buyer. It includes transferring assets, such as inventory, equipment, and intellectual property, and liabilities, such as legal claims and outstanding debts. The PBA also stipulates any conditions that must be met before ownership can be transferred, such as due diligence completion or legal dispute resolution.
- Allocation of Risk and Liability: The PBA allocates risk and liability associated with the business to the appropriate party. It includes addressing outstanding debts or legal claims against the business. By doing so, the PBA protects both parties from unexpected legal issues and costs arising after the sale.
- Warranties and Representations: The PBA includes warranties and representations the seller makes regarding the business. These statements assure the buyer that the business is being sold in good faith and that the seller has disclosed all relevant information about the business. These warranties and representations may include financial statements' accuracy, asset conditions, or compliance issues with legal or regulatory requirements.
- Payment Terms: The PBA outlines payment terms for sale, including the purchase price, payment method, and payment schedules or milestones that must be met before ownership transfers. By clearly stating these terms, both parties agree on the financial aspects of the transaction.
- Non-Compete and Confidentiality Agreements: The purchase of a business agreement may also include non-compete and confidentiality agreements that prevent the seller from competing with the business or disclosing confidential information about the business after the sale. After completing the transaction, these agreements protect the buyer from unfair competition or loss of trade secrets.
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Why Hire a Business Purchase Lawyer
Business purchases can be complex, and understanding the laws and regulations surrounding these transactions can be challenging for companies. Hence to navigate this process, companies need to seek the assistance of a business purchase lawyer. Here are some reasons why:
- Expert Knowledge of Legal Aspects: A business purchase lawyer deeply understands contract terms and legal requirements that must be followed. They are well-versed in the latest legal terminologies and can help companies navigate the documentation process smoothly.
- Negotiation Skills: Negotiating a contract is crucial to the business purchase process. A business purchase lawyer can help parties negotiate by identifying key starting points, collecting information, and presenting options to both sides.
- Extensive Network: A business purchase lawyer has a vast network of professionals experienced in the merger and purchase process, such as business development experts, accountants, and financial officers. They can recommend experienced professionals to ensure the best possible outcome for both companies.
- Documentation Preparation: Having all necessary documents in order is crucial during business transactions. A business purchase lawyer can help prepare and draft all required documents, including confidentiality agreements, non-disclosure agreements, consulting agreements, employment contracts, purchase or sale agreements, and vendor contracts.
- Contract Review: Business purchase lawyers can review contracts and offer their professional opinion regarding any necessary revisions. They ensure that all parties are protected during the transaction and can identify potential issues that may arise in the documents.
- Litigation Support: In litigation, a company must have a legal representative. An experienced business purchase lawyer can handle complicated litigation issues related to mergers and purchases, including trial preparation, research, and interrogatories.
- Risk Reduction: Hiring a business purchase lawyer can help reduce a company's risk of lawsuit exposure. The lawyer can assist clients in complying with federal and state employment laws, helping the company remain proactive in preventing legal complications.
- Lease and Agreement Review: Starting a new business venture often requires a reliable location, such as a commercial building or warehouse. A business purchase lawyer can help companies review all contracts, agreements, and terms before leasing or purchasing a property.
Key Terms for the Purchase of Business Agreement
- Accretion: It refers to an enhancement in per-share metrics in post-transaction phases.
- Acquirer: It is the purchaser organization that buys another company in an acquisition.
- Asset Deal: The deal happens when the acquirer buys only the assets of another organization, excluding its shares.
- Amalgamation: It refers to the unification of two or more companies into a new entity.
- Conglomerate: It refers to a merger of businesses with unrelated companies.
Final Thoughts on the Purchase of Business Agreement
A Purchase of Business Agreement is important for any business sale transaction. It defines the terms and conditions of the sale, including the purchase cost, payment terms, and any conditions or contingencies that must be met before the sale can be completed. This agreement is legally binding, so both parties should seek the advice of an attorney before signing to ensure that they fully understand its terms and implications.
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Meet some of our Purchase of Business Agreement Lawyers
Angela Y.
NJ and NY corporate contract lawyer and founder of a firm specializing in helping entrepreneurs. With a background in law firms, technology, and world class corporate departments, I've handled contracts and negotiations for everything from commercial leases and one-off sales agreements, to multi-million dollar asset sales. I love taking a customer-focused and business-minded approach to helping my clients achieve their goals. Other information: learning to surf, lover of travel, and one-time marathoner (NYC 2018) yulawlegal.com
Justin K.
I have been practicing law exclusively in the areas of business and real estate transactions since joining the profession in 2003. I began my career in the Corporate/Finance department of Sidley's Los Angeles office. I am presently a solo practitioner/freelancer, and service both business- and attorney-clients in those roles.
Max M.
Results oriented business attorney focusing on the health care sector. Formerly worked in Biglaw doing large multi-million dollar mergers and acquisitions, financing, and outside corporate counsel. I brought my skillset to the small firm market, provide the highest level of professionalism and sophistication to smaller and startup companies.
Bruce B.
Bruce Burk practice is in the area of small business, labor and employment, contracts, real estate and civil litigation. Bruce has litigated over 40 trials as well as many appeals. He prioritizes client communication and satisfaction as well as delivering high quality work product.
Cory B.
Attorney Cory Barack specializes in business, real estate, probate, and energy law. He can help you with oil/gas leases, easements, property sales, drafting contracts and wills, setting up companies, and resolving disputes. He is licensed to practice law in Ohio and is located in Eastern Ohio.
Daehoon P.
Advised startups and established corporations on a wide range of commercial and corporate matters, including VC funding, technology law, and M&A. Commercial and Corporate Matters • Advised companies on commercial and corporate matters and drafted corporate documents and commercial agreements—including but not limited to —Convertible Note, SAFE, Promissory Note, Terms and Conditions, SaaS Agreement, Employment Agreement, Contractor Agreement, Joint Venture Agreement, Stock Purchase Agreement, Asset Purchase Agreement, Shareholders Agreement, Partnership Agreement, Franchise Agreement, License Agreement, and Financing Agreement. • Drafted and revised internal regulations of joint venture companies (board of directors, employment, office organization, discretional duty, internal control, accounting, fund management, etc.) • Advised JVs on corporate structuring and other legal matters • Advised startups on VC funding Employment Matters • Drafted a wide range of employment agreements, including dental associate agreements, physician employment agreements, startup employment agreements, and executive employment agreements. • Advised clients on complex employment law matters and drafted employment agreements, dispute settlement agreements, and severance agreements. General Counsel • As outside general counsel, I advised startups on ICOs, securities law, business licenses, regulatory compliance, and other commercial and corporate matters. • Drafted or analyzed coin or token sale agreements for global ICOs. • Assisted clients with corporate formations, including filing incorporation documents and foreign corporation registrations, drafting operating and partnership agreements, and creating articles of incorporation and bylaws. Dispute Resolution • Conducted legal research, and document review, and drafted pleadings, motions, and other trial documents. • Advised the client on strategic approaches to discovery proceedings and settlement negotiation. • Advised clients on employment dispute settlements.
January 24, 2022
Peter W. Y.
Perceptive, solution-driven counselor and experienced attorney. Record of successful verdicts, settlements, negotiations, arbitrations, mediations, and deals. Effective claims management, litigation strategy, and risk consulting. Proven ability to oversee litigation teams, communicate to stakeholders, manage multiple projects effectively, and expand business relationships. Extensive experience handling legal issues in engineering and construction, environmental litigation, corporate and contractual, and insurance issues.
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ContractsCounsel User
Letter of Intent-Business Acquisition
Location: Texas
Turnaround: Less than a week
Service: Drafting
Doc Type: Business Purchase (all docs)
Number of Bids: 4
Bid Range: $695 - $3,000
ContractsCounsel User
Acquisition Agreement
Location: Delaware
Turnaround: A week
Service: Drafting
Doc Type: Business Purchase (all docs)
Number of Bids: 15
Bid Range: $200 - $8,500
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