Looking to buy or sell a Florida business? This can be quite the exciting experience, nevertheless managing the paperwork and details involved may feel daunting.
One of the fundamental documents when buying or selling a business include Asset Purchase Agreements, or APA. It is a good idea to consult with an experienced business law or contracts attorney. They can advise you on negotiating terms and drafting the perfect asset purchase agreement for your needs.
What Is an Asset Purchase Agreement?
An asset purchase agreement is an agreement between buyer and seller that formalizes the purchase of a business or business asset.
Most asset purchase agreements include the structure of the deal to purchase a business, the assets to be purchased, purchase price, rights and responsibilities of both parties and other transactional details.
Why Do I Need an Asset Purchase Agreement?
You may want an asset purchase agreement to ensure a smooth transition from buyer to seller when transferring assets. An asset purchase agreement can help protect the buyer and seller as it can specify and define rights, obligations and responsibilities of the parties involved. Having a well drafted agreement can also help to minimize potential hiccups and legal liability in the future resulting from the purchase of a business.
An asset purchase agreement may also help serve as a record keeper for business records for taxing or accounting purposes.
It is advisable to seek advice or drafting assistance from an attorney, our team of attorneys here at Rak Law Firm have experience in drafting contracts and managing business disputes.
Elements to Consider When Drafting a Florida Asset Purchase Agreement:
- Identify the parties involved: who is the business purchaser and who is the business seller.
- Asset description: information about the business and its assets to be purchased as well as what assets are excluded from the sale.
- Purchase price: the to be agreed-upon price of the business, any payment terms, such as down payment information or payment plans.
- Purchase period: closing date that the transaction is to be completed by and when ownership transfers to buyer. This may also include all necessary steps for closing such as conditions or requirements that may vary depending on the type of asset.
- Non-Compete and Non-Solicitation provisions: if applicable, these provisions may limit the seller from starting a competing business or solicitate employees or customers of the business that is pending sale.
- Confidentiality: a provision to protect sensitive business information disclosed during the negotiation or transaction of the business/asset purchase.
- Identify deadlines for completing the transaction tasks.
Do I Need an Attorney to Help With My Florida Asset Purchase Agreement?
Asset Purchase Agreements can be complex and you do not want to draft alone. Consulting an attorney regarding the transaction, agreement drafting and legal questions can help put you at an advantage in the negotiation process.
There are forms and templates online; however the best approach is to contact an attorney who can draft your agreement specific to your wants and needs. Many company buyers will find a form online and fill in the blanks accordingly with minimal strategic approach, this can unfortunately lead to problems or liabilities down the road.
Our team of attorneys at Rak Law Firm can help you in each stage of the transaction and review your documents to make sure they align with what you are looking for and what you need.
What Are The Steps Involved in Asset Purchase Agreements?
The process of drafting an asset purchase agreement includes several steps and usually you will want to include said steps within the body of your agreement, that way both parties are given notice of deadlines.
Steps:
- Negotiation: buyer and seller need to come together to negotiate the terms of the agreement, which may involve several offers and counteroffers before reaching agreement. Even at this early stage, it is advisable to hire an attorney to assist in the negotiation process as it could impact the transaction’s outcome.
- Earnest Money: once the asset purchase agreement is signed, the buyer will need to deliver the earnest money. Earnest money is money paid to confirm a contract. Parties to the asset purchase agreement can agree in the agreement a chosen fixed amount of earnest money or a percentage.
- Disclosures and provisions: it is essential to include information relevant to the seller regarding aspects of the business including but not limited to: equipment, real property, stockholders, employees, insurance policies, permits and licenses, any debts and subsidiaries.
- Due Diligence: meeting with a tax or accounting professional regarding detailed due diligence in the business. Meeting with a professional may allow you to ask questions and inspect the property and give detail regarding the status of the property or assets for the buyer. When there is thorough due diligence done, the business agreement can be specific and tailored to the needs of the parties.
- Closure: once the terms are drafted and financing is secured, the parties may schedule the closing of the asset purchase agreement. During the closing, the buyer may deliver the agreed upon funds to the seller and the seller may provide the necessary documents and information such as any keys to the property.
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