Business Sale & Purchase Agreement: What You Need to Know and What Should Be Included
Legal issues the contract has to cover in a business sale
A business sale and purchase contract memorializes the whole transaction: what is being sold, for how much, on what terms, and what each side promises about the business and about itself. It has to account for every asset that matters, tangible and intangible, from real estate, equipment and inventory to trademarks, client lists, formulas, software and goodwill.
It also has to deal with liability, because a purchaser who takes on the wrong debt or an unresolved lawsuit has overpaid no matter how good the price looked. When you buy or sell, the price is only one term among dozens.
Asset sale or stock sale: the two types of transactions
The first decision is the type of business sale, which is to say the structure. In an asset sale, the purchaser acquires the business’s assets and leaves the old entity, and most of its liabilities, with the seller. In a stock sale or membership interest sale, the purchaser takes the entity itself, with everything attached to it.
Sellers often prefer a stock sale for tax reasons; purchasers usually prefer an asset sale for liability reasons. Where the deal lands is a negotiation, and it should be an informed one.
The terms a sound sale agreement includes
A template can’t make that decision for you, and it can’t anticipate the specifics of your business. Here is what a sound business sale and purchase agreement typically covers:
- Names of the parties and the entity being sold
- Assets being sold or purchased, listed in full, including real estate, equipment, vehicles, inventory, cash, intellectual property, client lists, software, records and goodwill, or, in a stock or membership interest deal, the shares or interest being transferred and the percentage stake
- Purchase price, how it’s paid, and any seller financing, earnout or escrow holdback
- Asset allocation for tax purposes in an asset sale
- Seller representations and warranties about the business, its finances, its contracts and its compliance
- Due diligence period and what the purchaser is entitled to inspect
- Operation of the business between signing and closing
- Contingencies, such as financing, landlord consent or license transfers
- Assignment of the business premises lease
- Accounts receivable and accounts payable, and whether each stays with the seller or passes to the purchaser
- Inventory count and condition of equipment at closing
- Non-compete and non-solicitation covenants that survive closing
- Familiarization period, setting how long the seller stays on to train the new owner
- Indemnification and right of set-off after closing
- Closing date and the documents each side delivers at closing
- Assignability of the contract and business records to be transferred
Stock Sale and Purchase Contracts and Membership Interest Sale and Purchase Contracts
When business ownership changes hands instead of assets
When you sell or buy stock in a corporation or a membership interest in a Florida limited liability company, you’re transferring ownership of the entity rather than its individual assets. Startups sell equity to raise capital. Founders sell interests to bring in a partner or cash out.
A merger or a business acquisition by a larger company is often structured this way as well, and so is the purchase of a business by a partner who already owns part of it, and in a whole-business sale some sellers prefer to transfer the entity intact rather than run an asset sale, usually for tax reasons.
What the agreement has to say
A stock purchase or membership interest purchase agreement has to be exact about what is being transferred, because the purchaser steps into the entity’s history. It should identify the company and the parties, state the number of shares or the percentage interest and the price per unit, set out the seller’s representations and warranties, disclose known liabilities, and address indemnification, closing mechanics, any non-compete, and the seller’s post-closing role.
For an LLC, the operating agreement may restrict transfers or give other members a right of first refusal, so we review it before the deal is papered. For a corporation, bylaws and any shareholder agreement get the same review.
Asset Sale and Purchase Contracts
Choosing which of the business’s assets to take
An asset sale lets a purchaser choose what to take and what to leave behind. The contract has to make that boundary clear, because a vague description of “the business and its assets” invites a dispute about whether a particular contract, lease, vehicle or account was included.
Due diligence and the documents around the contract
An asset purchase agreement attorney also handles the pieces that surround the contract: bills of sale, assignments of leases and contracts, trademark assignments, lien searches and releases, and a state tax clearance so the purchaser doesn’t inherit the seller’s unpaid sales tax. Due diligence runs alongside all of it, and an attorney will review the findings against the seller’s representations before you close.
Our business asset purchase and sale contracts page goes deeper on how a business asset sale attorney structures these deals for sellers and how a business asset purchase lawyer protects a purchaser from successor liability.
Why Work With Legal Counsel, P.A.
Business sales sit where our two core practices meet, and an experienced business lawyer who also handles real estate is rare in Orlando. Buying a business often means buying or leasing real estate, assigning a commercial lease, or dealing with a landlord who has to consent. Selling one often means resolving a partnership or shareholder question first. Because we handle business law and real estate law in the same office, the deal doesn’t get split between two firms who don’t talk to each other.
Michele Diglio-Benkiran has practiced business and real estate law since founding the firm in 1999. Richard Sierra brings more than three decades of commercial litigation experience, which shapes how we write these agreements: every clause is drafted with the dispute it might one day cause in mind. Results matter, and so does a deal that closes without surprises. We offer a free consultation, and pay later options are available for qualifying clients.
Serving Orlando and Central Florida Business Owners
We represent purchasers and sellers throughout Orlando and Orange County, whether you’re looking to buy a business, looking to sell, or need a valuation reviewed before you decide, and we can help you grow a business through acquisition as readily as exit one, and across Central Florida from our Winter Garden, Orlando and Seminole offices, including Seminole, Osceola, Lake and Polk counties. If a business sale turns into a dispute, our Orlando business attorneys handle the litigation as well as the transaction.
