Business Buying Guide & Contract Template

The process of buying or selling a small business is a complex venture that involves careful consideration and thorough investigation. This guide will offer a perspective on the various phases of the transaction, from establishing objectives and conducting a comprehensive business evaluation to finalizing the deal.

Establishing Objectives

Buyer’s Objectives

Typically, a buyer’s prior experience aids in formulating goals. Buyers seldom seek to invest in entirely novel businesses; however, comprehending a business at a profound level can be challenging. For instance, one may understand a business from an operational standpoint but not from a marketing viewpoint, and vice versa. Hence, comprehensive research is crucial for the buyer.

Seller’s Objectives

From the seller’s perspective, the goal is usually to secure a fair price for the business. In many cases, sellers wish to retire without heirs to take over, or the business might no longer fit within a larger organization. Understanding the seller’s objectives helps in assessing the business’s market value and potential.

Searching for Potential Opportunities

Traditionally, business sellers either self-advertise or solicit assistance from a business broker. The process of seeking suitable business opportunities mirrors hiring employees. Newspapers, online platforms, and brokers who self-advertise are valuable information resources. Digital tools can help potential buyers discover businesses within specific geographic areas, categorized by the type of business and sometimes asset size categories.

Conducting a Comprehensive Evaluation

Initial Contact and Mutual Discovery

After making contact with a potential seller, a mutual discovery phase typically ensues. This can involve visiting the business, touring the premises, and discussing its operations and prospects. It’s essential for both parties to establish each other’s capabilities, giving the buyer an opportunity to demonstrate their ability to purchase the business.

Detailed Evaluation and Due Diligence

A detailed evaluation of the business significantly influences the price negotiations and should be approached with caution to avoid potential legal and financial issues. This evaluation can be broken into four areas: the seller’s background and objectives, legal considerations affecting the business, the business’s financial health, and the business’s position and potential in its industry.

Seller’s Background and Objectives

Understanding the business’s history, its growth trajectory, and the reasons for its sale is vital. Common reasons for sale include the seller’s wish to retire without heirs to take over, or that the business has been split off from a larger organization as it no longer fits.

Legal Considerations

Legal considerations include any pending lawsuits or regulatory issues that the new owner may need to address. Rental agreements and other long-term legal liabilities should be thoroughly evaluated, preferably with the assistance of a legal expert.

Financial Health

The business’s financial health is typically assessed through a detailed examination of the company’s books, including its accounting reports for at least five years or ideally since the business’s inception. Audited financial returns are ideal; however, if the seller refuses to pay for an audit, tax records can provide an alternative financial snapshot.

Position and Potential in the Industry

A thorough understanding of the company’s products, operations, and projection for future sales and profits in a competitive marketplace is also essential. The buyer must gain a comprehensive understanding of the business to confidently run it in the future, including knowledge of the company’s distribution networks, main customers, and the broader market influences.

Evaluation Checklist

A detailed checklist can guide buyers during the evaluation process. Key questions to consider include:

1. Why does the current owner want to sell the business?
2. What type of growth potential does this business have?
3. Can you turn around a declining business?
4. What is the financial condition of the business?
5. What are the results of the audited year-end financial statements.]

6. How competitive is the industry, and what is the business’s current market position?
7. What is the state of the industry and its future prospects?
8. Are there any impending legal or regulatory issues that could impact the business?
9. What is the business’s reputation, and how will a change in ownership affect it?
10. What is the business’s tangible and intangible asset value?

Valuing the Business

The process of valuing a business involves determining its current worth, which can be complex. Here are three of the most common methods:

1. Asset-based valuation: This considers the value of all the business’s assets, including equipment, inventory, property, etc. For a profitable business, this method tends to undervalue, as it doesn’t account for future earnings.
2. Income valuation: This method focuses on the business’s ability to generate profit, typically using a multiple of earnings or a capitalization rate applied to net income.
3. Market-based valuation: If there are comparable businesses for sale or recently sold, their prices can be used to gauge the market value of a similar business.

It’s generally recommended to use multiple valuation methods and combine the results to get a more accurate value. Working with professionals, such as business brokers or appraisers, can provide a more accurate and detailed valuation.

Negotiating the Deal

Negotiations involve not only the sale price but also the terms and conditions of the deal, which can be as important as the price itself. This might include payment terms, such as an upfront payment versus installments, or non-compete clauses.

Working with a professional business broker or advisor is highly recommended during this stage, as they can provide crucial guidance and mediation between the parties.

Financing

When the buyer and seller eventually agree to an installment sale, a leveraged buyout, a stock exchange, or an earn-out to transfer ownership of the company , the deal cannot proceed if the buyer fails to secure appropriate financing.

The majority of small businesses are purchased by buyers who fund a significant amount of the acquisition price. Nonetheless, the buyer must ensure that he or she has sufficient funds to make a down payment and meet the capital requirements of the business. Buyers are often obliged to seek finance coming from external means. The amount will be determined by how much the buyer invests. Before settling for agreement, lenders or investors prefer to see that the buyer is fully committed.

Financial institutions such as banks and consumer financing businesses are more favorable to borrowers involved in the purchase of larger businesses, although in such cases, the institutions frequently need buyers to put up the company’s inventory, machinery, real estate, and accounts receivable as collateral. In order to contact potential lenders with a thorough and well-thought-out loan proposal, prudent buyers in need of outside funding will ensure that they approach them with a comprehensive and well-considered loan proposal (including a good business plan). As a result, even when purchasing an existing business, the entrepreneur may not miss that work.

Closing the Deal

Closings are often accomplished through the use of an escrow settlement or the assistance of a settlement attorney who specialize in settlem. The money to be deposited, the bill of sale, and other related documents are held in escrow by a neutral third party known as an escrow agent until all sale conditions are met. Following that, the escrow agent distributes the kept papers and funds in accordance with the conditions of the contract.

Until then, if a lawyer handles the transaction, he or she drafts a contract and operates as an escrow agent until all of the sale’s terms are met, whether on behalf of the buyer or the seller. Unlike escrow settlements, which do not require the buyer and seller to attend together to sign the final documents, attorney-performed settlements do.

To accomplish the transaction between the seller and  buyer, some paperwork is, of course,  required. The most essential documents are purchase and sale agreement, but additional documents commonly used in closings include the escrow agreement, bill of sale, promissory note, security agreement, settlement sheet, financing statement, and employment agreement.

Asset Sale vs Stock Sale

Business purchase can be structured as either an asset sale or a stock sale. Asset sale is when only the assets are being sold, not the liabilities. Buyers would normally prefer that. Sellers, on the other hand, could benefit more from a stock sale, which is when business assets and liabilities are sold to new owner. 

Asset Sale

In an asset sale, you sell a collection of your company’s assets to a buyer. The company’s individual assets, including equipment, licenses, goodwill, client lists, and inventories. There are  tangible assets, such as the building or the lease and the intangible assets are, such as your customer list and the worth of the business. There could also be liabilities, like the building’s mortgage or accounts payable.

Asset sales are generally not involved with the purchase of the target’s cash so the seller usually keeps the target’s long-term debt obligations. It’s a matter of negotiation whether you sell all of your assets and liabilities to the buyer, and this can leads to more complications.

Advantages of Asset Sale

· The buyer receives a step-up in basis of assets acquired

· The buyer usually does not have to assume the liabilities of the target company.

Disadvantages of Asset Sale

· The seller is subject to a double layer of taxation

· Transferring assets may be more complicated

· Agreements tied to certain assets may need to be renegotiated

Stock Sale:

In a stock sale, the buyer purchases the target company’s stock from its shareholders. The stock sale is relatively simple hence it benefits both parties. The buyer simply buys all of the owners’ shares in the business which including all of its assets and liabilities. One significant advantage of stock sales above asset sales is that it doesn’t require further negotiations with customers over long-term contracts. That makes it a better deal for you as the seller because, unlike with an asset sale,everything is included at the beginning of the deal.

Advantages of Stock Sale

· Cash goes directly to the shareholders

· Transferring stock rather than assets is sometimes less complicated

Disadvantages of Stock Sale

· No step-up in the tax basis of assets acquired, with the exception of 338 (h)(10) and 336(e) elections.

· The lower depreciation expense can result in a higher future tax for the buyer, as compared to an asset sale.

· The buyers may accept more risk by purchasing the company’s stock including all contingent risks that are unknown or undisclosed.

FAQ

What should I consider before buying a business?

Before buying a business, consider the following aspects: The company’s financial health, market presence, competition, potential growth, and the industry’s overall outlook. Additionally, evaluate whether the company’s operations, products, and services align with your skills, interests, and goals.

How can I finance the purchase of a business?

Financing the purchase of a business can be done through several means. This could be personal savings, loans from family and friends, bank loans, seller financing, or outside investors. In some instances, you may also explore government-backed loans from the Small Business Administration (SBA).

What is due diligence in the context of buying a business?

Due diligence involves a thorough investigation of a business before making the purchase. This could include a review of financial records, contracts, operations, legal and tax compliance, and other important business details. It’s a critical step in the buying process to ensure you fully understand what you’re acquiring.

What are the advantages and disadvantages of buying an existing business?

Buying an existing business can provide several advantages, such as an established brand, existing customer base, experienced employees, and ongoing cash flow. However, there can also be downsides such as hidden problems with the business, a poor reputation that you’ll need to repair, or overestimated value of the business by the seller.

What is the difference between an asset sale and a stock sale?

In an asset sale, the buyer purchases individual assets of the business like equipment, licenses, client lists, and inventories. In a stock sale, the buyer purchases the company’s stock from its shareholders, acquiring all of its assets and liabilities. Both types have their pros and cons and the choice largely depends on the specific circumstances of the sale.

What documents are necessary to finalize a business purchase?

Some essential documents to finalize a business purchase include the purchase and sale agreement, escrow agreement, bill of sale, promissory note, security agreement, financing statement, settlement sheet, and potentially an employment agreement. The exact documents required may vary depending on the specifics of the transaction.

Why would a business owner choose an installment sale?

An installment sale could be chosen by a business owner for several reasons. Firstly, it could provide a steady income stream over a set period. Secondly, it can also have tax benefits, as it allows the seller to spread out the recognition of gain over several tax years. Finally, offering seller financing can attract more potential buyers, increasing the likelihood of a successful sale.

What is the role of an escrow agent in a business transaction?

An escrow agent plays a crucial role in a business transaction. They are a neutral third party who holds the funds and important documents related to the transaction until all the terms and conditions of the sale are met. This provides a layer of protection for both the buyer and seller.

How can a buyer assess the value of an existing business?

Assessing the value of an existing business can be complex and often requires the help of a professional, such as a business appraiser. However, a buyer can start with a review of the business’s financial statements, including income, cash flow, and balance sheets. Other factors to consider include the business’s market position, customer base, growth potential, and the overall health of the industry.

Can a buyer renegotiate the purchase price after due diligence?

Yes, a buyer can renegotiate the purchase price after due diligence. If the buyer finds issues or risks during the due diligence process that were not previously disclosed or understood, it may justify a reduction in the purchase price or changes to the terms of the agreement.

What are the key elements of a good business plan?

A good business plan should include an executive summary, company description, market analysis, organization and management structure, description of services or products, marketing and sales strategy, financial projections, and a funding request if applicable. The plan should be clear, concise, and persuasive, demonstrating that the business has a viable future and that the team has the skills and strategy to reach its goals.

What happens if a buyer defaults on a loan used to purchase a business?

If a buyer defaults on a loan used to purchase a business, the lender may have the right to seize the collateral that was used to secure the loan. This could include business assets such as inventory, equipment, or even the business premises. The exact consequences of a default would depend on the terms of the loan agreement. It’s also possible that the lender could take legal action to recover the unpaid debt.

What are the advantages of an asset sale over a stock sale in business transactions?

The distinction between asset and stock sales has significant implications for both the buyer and the seller. An asset sale is typically more favorable for the buyer, as it allows for a clear separation of the assets being acquired from the previous entity and its potential liabilities.

In an asset sale, the buyer acquires specific assets and assumes specific liabilities from the selling company. This type of sale has the following advantages:

1. Liability Control: In an asset sale, the buyer usually only acquires assets and not liabilities. This means the buyer can avoid exposure to unknown or contingent liabilities, such as legal actions or debt obligations, that could potentially be associated with the business.
2. Tax Benefits: Buyers often get a “step-up” in the tax basis of the acquired assets in an asset sale. The basis of an asset is its purchase price for tax purposes. When the buyer sells the asset, the basis is used to determine the taxable gain. The step-up means the buyer can claim higher depreciation and amortization deductions over time, providing significant tax benefits.
3. Selective Acquisition: Buyers can choose which specific assets they want to acquire and which liabilities they are willing to assume. This selective approach enables buyers to avoid assets that aren’t strategic to their business plan or liabilities that are too risky.

However, an asset sale can also present challenges. For example, certain contracts and agreements may need to be renegotiated or may not be transferable at all, adding to the complexity of the transaction. Additionally, an asset sale can lead to a double layer of taxation for the seller: once at the corporate level when the assets are sold, and then again at the shareholder level when the proceeds are distributed.

Why is it important for a buyer to secure financing before agreeing to a business purchase?

Securing financing prior to agreeing on a business purchase is critical for several reasons. First, it ensures the buyer is serious about the purchase and has the necessary funds to complete the transaction. Sellers can be hesitant to enter into agreements with buyers who do not have confirmed financing, as this poses a risk that the deal may fall through.

Secondly, securing financing early allows buyers to understand their financial constraints and budget, which can help guide negotiations. Knowing how much financing is available can help buyers determine what they can afford, and how much they can offer in the purchase.

Thirdly, having financing secured can make the transaction process smoother and faster. If a buyer needs to pause negotiations to arrange for financing, this could delay the deal and even provide an opportunity for other potential buyers to step in.

How can due diligence affect the final purchase price of a business?

Due diligence is a crucial step in the process of buying a business. It’s a comprehensive appraisal of the business done by the buyer to verify the seller’s claims about the business and assess its risks and opportunities.

The due diligence process can significantly affect the final purchase price of a business. If, during due diligence, the buyer discovers aspects of the business that were undisclosed or inaccurately represented, it could lead to a renegotiation of the purchase price.

For instance, the buyer may discover undisclosed liabilities, overestimated revenues, or issues that could potentially affect future profitability. These findings can provide the buyer with grounds to renegotiate the terms of the deal, often resulting in a lower purchase price.

However, it’s important to note that due diligence can also confirm the value of a business, giving the buyer the confidence to proceed with the transaction at the originally agreed-upon price. Either way, due diligence is a critical step to ensure that the buyer pays a fair price for the business.

What should I consider when selecting a lawyer to assist with a business purchase?

Choosing the right lawyer to assist with a business purchase is crucial as it can significantly impact the success of the transaction. A lawyer experienced in business transactions can provide valuable advice, mitigate potential risks, and help ensure a smooth process. Here are some key factors you should consider when selecting a lawyer:

1. Experience and Specialization: Choose a lawyer who has extensive experience in business transactions, particularly in the industry your prospective business is in. This specialization will help ensure they are familiar with common issues and risks associated with such transactions. Ask potential lawyers about previous transactions they’ve handled and their outcomes.
2. Communication: Your lawyer should be someone with whom you can communicate effectively. They should be able to explain complex legal terms and issues in a way that you can understand, and be responsive and accessible when you have questions or need assistance.
3. Professional Network: A good business lawyer often has an extensive network of other professionals, such as accountants, business brokers, and bankers. These connections can be beneficial during the purchase process and beyond.
4. Reputation and Reviews: Check online reviews and seek recommendations from others who have recently purchased businesses. You can also check the state bar association’s website to verify the lawyer’s credentials and see if there have been any disciplinary actions against them.
5. Fees: Legal fees can be significant, so it’s important to discuss and understand the lawyer’s fee structure upfront. Some lawyers charge an hourly rate, while others offer a flat fee for specific services. Make sure to get a detailed fee agreement in writing to avoid surprises later.

Remember, it’s important to feel comfortable with your lawyer and trust their guidance. It can be beneficial to interview several candidates before making your final decision.

How does an escrow agent help facilitate the closing of a business deal?

An escrow agent, also referred to as an escrow officer, plays a crucial role in the closing of a business deal. Their primary function is to act as a neutral third party who ensures that all conditions agreed upon by the buyer and seller are met before the transaction is finalized.

Here’s a detailed look at what an escrow agent does:

1. Holds Deposit: Upon the initiation of a business deal, the buyer usually makes a deposit as a sign of good faith. This deposit is held by the escrow agent until the closing of the deal.
2. Keeps Documents: The escrow agent holds important documents related to the transaction. This may include the purchase agreement, financial documents, and other legal papers.
3. Ensures Compliance: The escrow agent ensures all contractual conditions are met. They verify that inspections, appraisals, and due diligence are completed as agreed, and that necessary disclosures are made.
4. Facilitates Closing: When all conditions are met, the escrow agent oversees the closing. They release the funds to the seller, transfer ownership documents to the buyer, and make sure all necessary documents are filed and recorded.
5. Maintains Records: After the deal is closed, the escrow agent retains all records related to the transaction. This is important in case any disputes or questions arise in the future.

Engaging an escrow agent can add an extra layer of protection and efficiency to the closing process. It gives both the buyer and seller peace of mind knowing that their interests are protected.

What are the tax implications of buying a business?

Buying a business can have significant tax implications, which can greatly impact the overall cost and value of the transaction. It’s important to understand these implications as you consider the purchase price and negotiate the terms of the deal.

1. Asset vs Stock Sale: As discussed earlier, the structure of the sale (asset sale vs. stock sale) can have considerable tax consequences. In an asset sale, the buyer gets to “step up” the basis of the acquired assets to their fair market value, potentially resulting in future tax savings due to higher depreciation and amortization deductions. However, an asset sale can result in double taxation for the seller—once at the corporate level when assets are sold, and again at the individual level when the proceeds are distributed to shareholders. On the other hand, a stock sale generally results in only one level of taxation for the seller, but the buyer does not receive a step-up in the basis of the acquired assets.

2. Allocation of Purchase Price: In an asset sale, the allocation of the purchase price among the various assets can significantly affect the taxes for both the buyer and the seller. Different assets are subject to different tax rates, so the way the price is allocated can have a significant impact.
3. Goodwill: Goodwill is often a significant part of a business purchase price. For the buyer, goodwill is amortizable for tax purposes over a 15-year period. For the seller, the tax treatment of goodwill will depend on the entity type and the specifics of the sale.
4. Sales Tax: Depending on the state, some asset sales may be subject to sales tax.
5. Indirect Taxes: Other indirect taxes may apply depending on the nature of the business and the jurisdiction, such as transfer taxes, stamp duty, and real estate taxes.

Given these complexities, it’s important to involve tax professionals early in the transaction to understand the potential tax implications and structure the deal in the most tax-efficient way possible.

How should I conduct due diligence when buying a business?

Due diligence is a critical part of buying a business. It’s the process of thoroughly checking and verifying all aspects of the business before finalizing the purchase. A well-executed due diligence process can save you from costly mistakes and ensure you’re making a sound investment. Here’s a broad look at how to conduct due diligence:

1. Financial Due Diligence: Review all financial records, including profit and loss statements, balance sheets, cash flow statements, and tax returns for the past three to five years. Look for any inconsistencies or red flags, such as declining revenue, high debt levels, or large, unexplained expenses. If necessary, hire a professional accountant to help with this.
2. Operational Due Diligence: Examine the business’s operations, including its processes, systems, and supply chains. Visit the business’s premises and meet with key staff members. Evaluate the condition of the business’s assets, such as machinery, equipment, and real estate.
3. Legal Due Diligence: Verify that the business is legally compliant. Check that it has the necessary licenses and permits, that it’s in good standing with regulatory bodies, and that there are no outstanding legal disputes. If the business has patents, trademarks, or other intellectual property, confirm that these are valid and properly registered. Consult with a lawyer to ensure that all contractual obligations, such as leases and supplier contracts, are favorable and transferable.
4. Market and Competitive Due Diligence: Assess the business’s position in the market. Look at its competitive landscape, customer base, and growth prospects. Are there emerging threats that could impact future profitability?
5. Environmental Due Diligence: For certain types of businesses, particularly those involved in manufacturing or other industries that may have an environmental impact, an environmental due diligence review may be necessary to identify potential liabilities.

Remember, due diligence is your opportunity to fully understand what you’re buying. Take your time, ask lots of questions, and don’t be afraid to walk away if you discover significant issues.

What should be included in a purchase agreement when buying a business?

A purchase agreement, also known as an acquisition agreement, is a legal document that specifies the terms and conditions related to the purchase of a business. Here’s a non-exhaustive list of what should typically be included:

1. Identification of the Parties: The names and addresses of the buyer and the seller.
2. Description of the Transaction: A detailed description of what is being purchased, whether it’s the assets, the stock, or both.
3. Purchase Price and Payment Terms: The agreed-upon price, how it will be paid, and the timeline for payment.
4. Allocation of Purchase Price: If it’s an asset sale, how the purchase price is allocated among various assets.
5. Representations and Warranties: Statements made by the seller about the condition of the business. These might cover financial statements, compliance with laws, ownership of assets, and absence of undisclosed liabilities.
6. Covenants: Promises made by both parties to do (or not do) certain things between signing and closing, and sometimes for a period after closing.
7. Indemnification Provisions: Provisions outlining who would be responsible for costs and legal fees associated with potential future issues or disputes that arise after the transaction.
8. Conditions to Closing: Specific conditions that must be met for the deal to close. This might include obtaining necessary consents or approvals, no material adverse change to the business, and satisfactory completion of due diligence.
9. Termination Rights: Circumstances under which either party can walk away from the deal without penalty.
10. Post-Closing Obligations: Agreements about how certain matters will be handled after the transaction closes. This might include the handling of post-closing adjustments, tax matters, or any transitional services to be provided by the seller.

Because of the complexity and legal nature of these documents, it is highly recommended that both buyers and sellers engage experienced legal counsel to draft and review the purchase agreement.

What is the role of a business broker in a business purchase?

Business brokers, much like real estate agents, provide brokerage services in the sale of businesses. Here are some of the roles they play in a business purchase:

1. Valuation: Brokers can help determine a fair market price for the business, using their understanding of the market and valuation methods.
2. Marketing the Business: Brokers have networks of potential buyers and can market the business to these networks in a way that maintains confidentiality.
3. Negotiation: Brokers can act as a buffer between the buyer and seller during negotiation, smoothing over any tension and keeping the deal on track.
4. Coordination: Brokers can coordinate with other professionals involved in the sale, such as accountants, attorneys, and financiers. They also assist with organizing all of the documentation necessary to complete the sale.
5. Advice: Brokers provide advice and guidance to both the buyer and the seller throughout the transaction process, leveraging their expertise in the business buying and selling process.

While engaging a broker can add to the cost of the transaction, for many buyers and sellers, the benefits in terms of saving time, reducing stress, and potentially achieving a better price outweigh the costs. However, as with any professional service, it’s important to carefully select a broker who is reputable, experienced, and a good fit for your needs.

BUSINESS PURCHASE AGREEMENT TEMPLATE

Here’s a summary of its key sections:

1. Parties and Effective Date: The agreement identifies who the buyer and seller are, and it sets the date when the agreement will start.
2. Purchase and Sale: This section outlines what the buyer is purchasing. In this case, it’s the business’ assets (listed in Exhibit A), excluding some specific assets.
3. Purchase Price and Payment Terms: Here, it details the total price the buyer will pay for the business and how this payment will be made, including the Promissory Note (attached as Exhibit B).
4. Representations and Warranties: Both the buyer and the seller make certain promises about the condition of the business, including any liabilities.
5. Covenants: This section details what both parties promise to do (or not do) between the date of the agreement and the closing date. It includes the seller’s obligation to operate the business as usual, the buyer’s right to investigate the business, and both parties’ commitment to confidentiality.
6. Indemnification: Both parties agree to protect each other from any financial loss due to a breach of the agreement.
7. Closing: This specifies where and when the final sale will happen.
8. Costs and Expenses: Each party is responsible for its own costs associated with the deal.
9. Governing Law: The agreement will be enforced under the laws of a specific state.
10. Entire Agreement: This indicates that the agreement is the complete agreement between both parties and supersedes any prior discussions or agreements.

BUSINESS PURCHASE AGREEMENT

THIS BUSINESS PURCHASE AGREEMENT (the “Agreement”) made and entered into this __ day of __, 20, (the “Effective Date”), by and between _________________ (the “Seller”), a corporation duly incorporated under the laws of the State of ____, and _________________ (the “Buyer”), a limited liability company duly organized under the laws of the State of ____.

RECITALS:

WHEREAS, the Seller is engaged in the business of manufacturing and selling high quality electronics (the “Business”) located at 123 Main Street, Anytown, State, 12345; and

WHEREAS, the Seller owns certain assets related to the Business, including machinery, inventory, goodwill, intellectual property, and customer relationships (the “Assets”); and

WHEREAS, the Buyer desires to purchase such Assets from the Seller, and the Seller desires to sell such Assets to the Buyer, all on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows:

1. SALE OF ASSETS:

1.1 Description of Assets: The Seller agrees to sell, transfer, assign, convey and deliver to the Buyer, and the Buyer agrees to purchase from the Seller, all of the Seller’s right, title and interest in and to the Assets. The Assets consist of all of the assets, properties, rights, and interests of the Seller, wherever located, including but not limited to, the following: machinery, inventory, accounts receivable, trade names, trademarks, customer lists, goodwill, and the leasehold interest in the premises located at 123 Main Street, Anytown, State, 12345.

1.2 Excluded Assets: Notwithstanding the foregoing, the Assets to be sold hereunder shall not include the following (the “Excluded Assets”): Cash on hand, accounts payable, accrued expenses, long-term debt, any lease, license or contract not expressly assumed by the Buyer under this Agreement.

2. PURCHASE PRICE AND TERMS OF PAYMENT:

2.1 Purchase Price: The total purchase price for the Assets shall be One Million US Dollars ($1,000,000). The Purchase Price shall be allocated among the Assets as set forth in Exhibit A attached hereto.

2.2 Payment of Purchase Price: The Purchase Price shall be payable as follows: $200,000 to be paid in cash at closing, and $800,000 to be paid in the form of a promissory note, bearing interest at the rate of 5% per annum, with principal and interest payable in equal monthly installments over a period of five years. The form of the promissory note is attached hereto as Exhibit B.

3. REPRESENTATIONS AND WARRANTIES OF SELLER:

The Seller represents and warrants to the Buyer that the financial statements of the Business accurately reflect the financial condition of the Business, that the Business is in compliance with all applicable laws and regulations, that the Seller has good and marketable title to the Assets, free and clear of all liens and encumbrances, and that the conduct of the Business has not materially changed since the date of the latest financial statements.

4. REPRESENTATIONS AND WARRANTIES OF BUYER:

The Buyer represents and warrants to the Seller that the Buyer has the financial capability to complete this transaction, that the Buyer has the necessary corporate authority to enter into and perform this Agreement, and that the execution and delivery of this Agreement does not violate any agreement to which the Buyer is a party.

5. COVENANTS:

5.1 Conduct of Business: From the date hereof until the Closing, Seller shall conduct its business only in the ordinary course and shall not enter into any contract or transaction that would materially affect the value of the Assets or the Business without the prior written consent of Buyer.

5.2 Access and Investigation: Between the Effective Date and the Closing, Seller will give Buyer and its agents full access to the premises, properties, books, records, and personnel of the Business to enable Buyer to confirm the accuracy of the representations and warranties of Seller.

5.3 Confidentiality: Both parties agree to keep the terms and conditions of this Agreement confidential, except as required by law or agreed to in writing by the parties. Confidential information includes, but is not limited to, information related to the financial condition, results of operations, customers, employees, suppliers, pricing, technology, business plans, marketing plans, and trade secrets of the Business. Confidential information does not include information that is or becomes publicly available without breach of this Agreement or is legitimately obtained from a third party without restriction on disclosure. In the event of a breach of this confidentiality provision, the non-breaching party will be entitled to equitable relief, including injunction and specific performance, in addition to all other remedies available at law or in equity. Any confidential information shared as part of this Agreement will be used for the sole purpose of evaluating the proposed transaction and will be returned or destroyed if the transaction does not proceed.

6. INDEMNIFICATION:

The Seller agrees to indemnify and hold harmless the Buyer from any loss, liability, damage, claim, or expense incurred by the Buyer arising out of any breach of any of the Seller’s representations, warranties, and covenants in this Agreement. The Buyer agrees to indemnify and hold harmless the Seller from any loss, liability, damage, claim, or expense incurred by the Seller arising out of any breach of any of the Buyer’s representations, warranties, and covenants in this Agreement.

7. CLOSING:

The closing of the sale and purchase of the Assets (the “Closing”) shall take place at the offices of Seller’s counsel on _, 20 at ___ a.m./p.m., or at such other place or on such other date as the parties may mutually agree.

8. COSTS AND EXPENSES:

Each party shall bear its own costs and expenses (including legal fees) incurred in connection with this Agreement and the transactions contemplated hereby.

9. GOVERNING LAW:

This Agreement shall be governed by and construed in accordance with the laws of the State of ___________, without regard to its conflict of laws principles.

10. ENTIRE AGREEMENT:

This Agreement, including Exhibit A and Exhibit B, contains the entire agreement between the parties and supersedes all prior agreements and understandings, oral or written, relating to the subject matter of this Agreement.

IN WITNESS WHEREOF, the Seller and the Buyer have caused this Business Purchase Agreement to be executed by their duly authorized representatives as of the Effective Date.

SELLER: ________________________________

By: _________________________________

Name: ______________________________

Title: _______________________________

BUYER: _______________________________

By: _________________________________

Name: ______________________________

Title: _______________________________

Exhibit A – List of Assets

The following is an illustrative (but not exhaustive) list of the assets being transferred from Seller to Buyer as part of this Business Purchase Agreement:

1. All tangible personal property, including but not limited to fixtures, machinery, equipment, vehicles, inventory, and office supplies.
2. All intangible property, including but not limited to intellectual property, trademarks, copyrights, trade secrets, patents, customer lists, supplier lists, business records, goodwill associated with the Business, and rights under all contracts and agreements.
3. All licenses, permits, and authorizations necessary for the operation of the Business.
4. All real property, together with appurtenances, rights, and privileges pertaining to the property, including all leasehold interests (but subject to all mortgages, liens, encumbrances, easements, and restrictions of record affecting the property).
5. [Other specific assets, if any]

Excluded from this Agreement are the following assets:

[List of Excluded Assets]

The description of the assets and their condition are as of the Effective Date. No representation or warranty is given as to the condition of the assets at the time of the Closing, except as otherwise provided in this Agreement.

Exhibit B – Promissory Note

PROMISSORY NOTE

$___________ [insert amount] ____________, 20

FOR VALUE RECEIVED, the undersigned Buyer promises to pay to the order of Seller the principal sum of ________ (USD) with interest thereon at the rate of ___% per annum, on the unpaid balance.

1. Payment: This Note is payable in ____ (insert number) equal consecutive monthly installments of $__________ each, commencing on _________, 20, and continuing on the same day of each month thereafter until _____, 20, when the remaining principal balance and all accrued interest shall be due in full.
2. Prepayment: The Buyer may prepay this Note (in whole or in part) prior to the Due Date with no prepayment penalty.
3. Default: If the Buyer fails to make any payment when due, the Seller may declare the entire outstanding principal amount under this Note and all accrued unpaid interest immediately due and payable.
4. Governing Law: This Note is governed by the laws of the State of _________.
5. Entire Agreement: This Note contains the entire agreement of the parties and supersedes all prior understandings, oral or written, relating to the subject matter.

BUYER: _______________________________

By: _________________________________

Name: ______________________________

Title: _______________________________

Notary Acknowledgment

State of _________ County of ________

On this ____ day of _____, 20, before me, a Notary Public in and for said county and state, personally appeared _______________ (name of individual or authorized representative), known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged that he/she executed the same for the purposes therein contained.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

Notary Public: _______________________ [Notary Seal] My Commission Expires: ________________