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.
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.
The parties of the asset purchase agreement are the buyer and the seller.
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.
The following are the most common terms 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.
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.
Some of the advances of using an asset purchase agreement include:
An asset purchase agreement does have certain disadvantages, including:
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.
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.
Add the date on which the asset purchase agreement will be signed. That will help to clearly define the timeline.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Some of the most common uses of an asset purchase agreement include:
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.
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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.
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.
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.