4 Things You Should Know About Asset Purchase Agreements

Assets purchase agreement Dan Burke

When it comes to selling an asset or buying one, having an agreement that lays out all the details pertaining to it is vital. But what kind of document is necessary for that? And what else does that document entail? The catch-all document for selling assets is an “Asset Purchase Agreement”, and they’re much simpler than their name gives them credit for!

What is an APA?

An APA, or Asset Purchase Agreement, is a contract in which a buyer and seller agree to the transfer of ownership for an asset at an agreed price. In layman’s terms, it’s a contract where you specify a certain object’s worth to be sold. The contract needs to describe the asset being purchased and must set the terms in which the goods must be transferred.

The most important thing to remember when filling out this document is to maintain specificity throughout. The more things that are specified within the transferring of ownership and the price, the less likely it is you encounter a loophole or gray area. No detail or in-depth description is too much – it is better to have too much information than not enough. 

Who is the Agreement For?

This is the first part that should be completed in an asset purchase agreement. You should clearly define the seller and the buyer, or both parties taking part in the agreement. This is a simple but very crucial step – without properly identifying both respective parties and their counterparts, the agreement becomes null and void. This also acts as a way to protect yourself legally during the contract process. 

What Asset is Being Purchased?

Although it might seem obvious what is being purchased should be written in, the asset needs to be described in detail and have everything associated with it specified. The level of description varies depending on what is being sold, but it is best to keep in mind that “more is more” when it comes to describing the asset.

For land: define the exact description of the land records. This includes acreage, if there are any buildings, parking available or anything else on the land. 

For businesses: list every single piece of equipment that is included and owned. Even if it is a stapler, it is owned by the business and needs to be included. Additionally, include important details regarding the paperwork of creating the business. These can be tax documents, certificate of incorporation and other papers vital to the business and its activities.

For services: provide details of what kind of service it is. This includes what is and is not included in the service, how much it costs and more. The more details provided for this section, the better. 

How Much is the Asset?

Yes, price needs to be defined, but the key part of this section is how the payment will be delivered. Debts are included in this section, especially if there is a loan included in the sale of the asset. The frequency of payments (all at once, monthly, weekly) are also defined in this section. 

Representation

This section is the catch-all segment that contains what each party of the agreement is relying on. By relying on, we mean warranties on products, the condition and quality of products, and the legal status of both parties in the agreement. 

This is also the section where shareholder agreements and NDAs (or non-disclosure agreements) are included. All of these documents are important to present when selling an asset, because you need to be transparent to the buyer for what they are getting into when purchasing and taking over ownership.  

For more information on what to put into your asset purchase agreement, contact Dan Burke Attorney at Law for an easy and hassle-free creation of your legal documentation.

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