Asset Purchase Agreement Template

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An asset purchase agreement is a legal document used to enter into a formal agreement to buy or sell certain assets. Asset purchase agreements are typically necessary to purchase an entire business, a part of a business, or business assets, such as intellectual property or equipment. Fill out this template on Lawrina by answering simple questions and get a ready-made PDF document in a flash.
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Document Types
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Template Description

Paper titled "Asset Purchase Agreement"; woman and man shaking hands; diagrams, tables, desk

This asset purchase agreement template is meant to serve as a guide through the purchase or sale of an asset. The template will include space to add the parties to the agreement and will use standard key terms. When purchasing or selling an asset, it helps to know when you should use this type of legal document and when it may be better to use something else.

What Is an Asset Purchase Agreement?

An asset purchase agreement is an agreement between two parties that finalizes the sale and purchase of a business or its asset or assets. Some common examples of these assets include machinery, equipment, intellectual property, and licenses. The asset purchase agreement covers all the details of the asset and its sale, including the price, warranties and guarantees, risk assessment, and more. The agreement also serves to transfer the ownership of the asset from one individual or firm to another.

One common misconception is that it is necessary to buy all the assets associated with a business. However, one purchaser is not required to purchase all of a business’s assets or liabilities under an asset purchase agreement. An interested party can select one or more assets to transfer ownership. 

Parties of the Asset Purchase Agreement

The parties of the asset purchase agreement are the buyer and the seller.

  • The seller is usually the individual or company that is selling its assets. The asset can be the business as a whole, or it can be just parts of the business, such as machinery, equipment, or intellectual property. 

  • The buyer is the individual or company that is interested in purchasing the business or its parts, which will be detailed in the asset purchase agreement.

The parties of the asset purchase agreement must come to a consensus regarding its terms and conditions. They will determine a suitable price and a payment schedule, if applicable. It is up to the seller to disclose all relevant information about the asset to allow the buyer to make an informed decision. Either party can seek legal counsel to help find and use the most optimal terms for the contract and to help ensure compliance with state law.

Key Terms

The following are the most common terms included in an asset purchase agreement:

  1. Asset — The document must include a detailed description of the asset that is the subject of the agreement.

  2. Price — The price of the asset is the amount that the buyer has agreed to pay for the purchase.

  3. Warranties — If either the seller or the buyer is making warranties to the other party, the details of the warranties should be included in the contract.

  4. Breach — The document should contain details about what constitutes a breach, as well as any repercussions for breaching the contract.

  5. Party information — The agreement will include relevant information for both parties, such as their names, addresses, and contact details.

What Is Included in an Asset Purchase Agreement?

Though contracts may differ from one individual or business to another, a classic asset purchase agreement template contains many of the same elements. The document should include details about the parties entering into the agreement, such as their full names and contact information. There also needs to be a description of the assets that are being sold, as well as any warranties. After the description should be the agreed price with payment details. Another essential part of the contract is the terms and conditions and an explanation of what would constitute a breach and the related repercussions.

Advantages and Disadvantages of an Asset Purchase Agreement

As with any agreement, an asset purchase agreement serves to protect both parties’ interests and allow the transaction to take place securely. Notably, there are some advantages and disadvantages of using an asset purchase agreement.

Advantages

Some of the advances of using an asset purchase agreement include: 

  • Protection — An asset purchase agreement can protect both parties involved in the transaction. The terms and conditions of the contract help to ensure that the seller can perform the sale at the selected rate and that the buyer will get exactly what is expected for the purchase price.

  • Specific asset acquisition — Instead of purchasing a whole business and/or all of its assets, a buyer can pick and choose which assets to purchase and include in the agreement.

  • Limited liability — Using an asset purchase agreement form, a buyer can decrease the risk associated with certain purchases by only assuming liability over the assets that are part of the agreement.
Disadvantages

An asset purchase agreement does have certain disadvantages, including:

  • Incomplete business acquisition — An asset purchase agreement is most commonly used for the sale and purchase of individual assets related to a business. Purchasers who wish to buy other aspects of the business, such as licenses and contracts, may need to prepare additional agreements.

  • Seller limitations — An asset purchase agreement form may carry some limitations for the seller. If the idea is to sell all of a business’s assets and liabilities, this type of contract might not be sufficient.

  • Liability risks — Even after conducting a thorough risk assessment, some liabilities may not become apparent until after the agreement has been signed.

How To Write an Asset Purchase Agreement

Though each contract will be a little bit different, you can follow an asset purchase agreement template when writing your contract. The steps below can help you to get started.

1. Acquire the Document

Start modifying this asset purchase agreement template on Lawrina. Our template-oriented questions will help you draft the final version of the document and include all crucial information. 

2. Record the Date of the Agreement

Add the date on which the asset purchase agreement will be signed. That will help to clearly define the timeline.

3. Name the Parties

In the designated space provided in the asset purchase agreement template, add the names and contact information for both parties that are entering into the agreement — the buyer and the seller.

4. Indicate the Assets

Identify the asset or assets that are the subject of the asset purchase agreement. Describe those assets in detail, including quantities, identifying information, and any other relevant information.

5. Establish the Price and the Deposit

Include in the asset purchase agreement the price of the asset or assets being transferred. If there will be a deposit made, state the amount and conditions as well. The more details the parties include in the contract, the better legal protection the contract can offer.

6. Set the Payment Conditions

Describe how the sale will be executed by way of the payment conditions in the asset purchase agreement form. Generally, the buyer and seller can agree to one lump sum payment or multiple installments. Either way, include a calendar with the payment amounts and due dates.

7. Discuss the Financial Status of the Sale

Cover in the contract how any potential expenses will be handled after signing. An asset purchase agreement template will contain a clause relating to the allocation of taxes and liabilities associated with the sale. Be sure to specify which party will be liable.

8. Present the Purchase to All Third Parties for Approval

Include any third parties if the asset purchase agreement template needs their approval to go into effect. Be sure to add a clause specifying which consents are required. Then send the contract to those people for them to review.

9. Document the Costs

Record in the asset purchase agreement all the costs associated with the transaction. Be sure to allocate those costs to either the buyer or the seller.

10. Include Mediation and Arbitration Terms as a Precaution

Add a clause to the asset purchase agreement about dispute resolution. Specify how the parties would solve any potential conflicts that may arise regarding the transaction.

11. Mention the Governing Law of the Agreement

Specify the jurisdiction in which the asset purchase agreement is being made. Should the contract ever need to be viewed in the court of law, knowing the applicable jurisdiction in advance can be very helpful.

12. Review the Content Outlining the Sale

Go through the entire asset purchase agreement document to ensure that the terms and conditions align with the requests and iterations made by both parties. Additionally, be sure to include all relevant terms and warranties in the asset purchase agreement.

13. Provide Evidence of the Buyer’s Approval

Add evidence of the buyer’s approval, which is usually the signature at the bottom of the asset purchase agreement. It is vital for the buyer to acknowledge the asset purchase agreement and sign the document for it to become effective.

When To Use an Asset Purchase Agreement

An asset purchase agreement can be very beneficial in some situations and entirely unnecessary in others. Buyers and sellers often use asset purchase agreement templates to document the acquisition of resources when the parties of the agreement want more control and flexibility. A buyer may only want to purchase certain licenses or machinery, not the whole business with all of its liabilities. A buyer can include the agreement as part of a bigger business deal, or treat it as a standalone document. 

Common Use Cases

Some of the most common uses of an asset purchase agreement include:

  1. Business/asset acquisition — Asset purchase agreements are often used for flexible asset acquisition. When a buyer wants to acquire a company’s asset or assets without its liabilities, the parties generally use this type of agreement.

  2. Asset transfer — An asset purchase agreement form can simply facilitate the transfer of an asset from one entity to another. The document becomes a legal record attached to the sale of an asset.

When Not To Use the Asset Purchase Agreement

An asset purchase agreement isn’t always needed. Specifically, if one party wants to buy the whole business and everything that goes with it, a different type of contract may be required. Additionally, another type of contract may be needed for two companies to merge and/or consolidate their operations.

Also Read

Frequently Asked Questions

What happens to employees in an asset purchase?

An asset purchase agreement for a business needs to specify if the business is being transferred with or without its existing employees. Employees can be transferred to the new entity or let go in accordance with the asset purchase agreement. 

Why do I need an asset purchase agreement?

An asset purchase agreement sample can help the buyer and seller create a document that will better protect both parties. With a signed agreement in place, the parties can make sure that the terms and conditions are enforced. The document enables the buyer to avoid certain risks and liabilities and the seller to receive full payment in accordance with the timeline.

 

Using an asset purchase agreement will encourage the seller to provide a clear description of everything that’s being transferred, preventing future conflicts or misunderstandings. Should an issue arise, the contract’s conflict resolution clause will help the parties navigate the process in the best way possible.

Do I need an attorney to write an asset purchase agreement?

When writing an asset purchase agreement, seeking the services of an attorney is not necessary, as you can draft the document on your own. However, an experienced professional may help to ensure that the contract is enforceable and protects the interests of both parties. A lawyer may also aid his or her client in negotiating better terms.