What if the sale transaction covers only the assets in the business such as the customer list, real estate, machinery, but not the whole business entity through sale of the stock? If you're a sole proprietor you can only sell assets because there are no shares to sell.
A Sale of Business Assets Agreement is a contract that covers the sale and purchase of assets in a business. If you're the seller, you'll want to have a record of the transaction, including its terms and conditions, clearly laid out in a legal agreement.
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A Sale of Business Assets Template is the form to use. Here's an example for reference:
Sale of Business Assets Agreement
This Sale of Business Assets Agreement (the "Agreement") is made and entered into on this day, xxth January 20XX (the "Date of Execution").
The Agreement is between ___________ (the "Seller") of ______________ (the "Business"), and ______________ (the "Buyer").
The Buyer and the Seller (and business sale "Broker" if applicable) are hereby referred to as the "Parties" (or in the singular, "Party") to this Agreement.
2. Background information
The Seller owns assets of _____________(enter Business name), which is a going concern undertaking the business of _________________________________________ (brief description of main business activities).
The Seller wishes to sell certain assets of the business to the buyer (the "Assets") as set out in the Agreement and the Buyer wishes to buy the Assets.
The Assets in this sale (listed in the Schedules, attached) shall be conveyed through a standard Bill of Sale executed by the Seller.
3. Purchase Price
The Buyer shall pay, and the Seller shall accept the sum of:
$_________ as total consideration (to be referred to in the Agreement as the "Purchase Price") for the Assets of the Business, including its tangible and intangible Assets (as detailed in Section 3, "Allocation of Assets").
The net amount of operating expenses (with evidence provided by the Seller to include taxes, rent, payroll and any other relevant expenses) applicable on the signature date of final sale documentation, shall be either added or subtracted from the Purchase Price when the Bill of Sale is presented by the Seller.
4. Allocation of Assets
This Agreement allocates the Purchase Price of the Assets into the following category of Assets (delete as appropriate):
a. The Inventory: $___________ covering the stock in trade, merchandise, finished goods, work in progress and raw materials (refer to Schedule A attached for the detailed Inventory of items to be bought and sold under this Agreement)
b. Tangible Assets: $___________ covering all equipment, fixtures and fittings, furniture, and any other Tangible Assets (refer to Schedule B attached for the Tangible and Intangible Assets bought and sold under this Agreement)
c. Intangible Assets: $__________ covering all the trade, goodwill and other Intangible Assets (refer to Schedule B attached)
d. Leasehold: $_________ covering the interest owned in the place where the Business is conducted (the "Premises”), which is assignable to the Buyer through a valid lease transfer (refer to Schedule C attached showing lease documentation and conditions of lease transfer)
5. Terms of the Agreement
The payment terms for this Agreement shall be (amend as appropriate):
a. Cash deposit: $___________ paid in cash as a deposit upon execution of this Agreement (state agreed payment method e.g. bank check), to be held by______________. If the Buyer fails to fulfil his obligations in this Agreement the cash deposit will be retained by the Seller as damages
b. Cash sum: $_____________additional cash sum payable once the Buyer and Seller have signed all relevant documents (again, state agreed payment method)
c. Promissory Note: $____________ paid by the Buyer to the Seller bearing interest at _______% per annum. The Promissory Note shall be secured on the Assets of the Business as detailed in Schedules A, B and C, as well as any further Assets purchased for the Business during the period when the Promissory Note is effective. The Buyer shall have the option of repaying part or all of the balance on the Promissory Note at any time without incurring an additional charge
6. Representation and warranties
This Agreement represents the complete and current understanding of the Parties concerning the sale of the Business as described in this Agreement. In addition to the main body of the Agreement, Schedule D details additional written and oral understandings, warranties, representations and agreements, which shall survive closure of the sale:
a. the Agreement and all attached Schedules supersede any previous written or oral understandings, warranties, representations and agreements between the Seller and the Buyer
b. the Seller agrees to convey to the Buyer in this Agreement concise and clearly presented title to all the Assets documented within it, free from known liens and encumbrances
c. the Seller is entitled to use part of the Purchase Price money to settle any identified encumbrances pertaining to the Assets being transferred, or where documentation is pending, allow the money to settle these encumbrances to be held with the Attorneys representing the Parties in this Agreement.
d. any part of this Agreement can only be modified or changed by a written instrument signed by both the Seller and the Buyer. This includes waivers to any of the terms or conditions detailed in this Agreement
e. the terms and conditions in this Agreement shall apply to and be binding on the heirs, successors, survivors and assigned personal representatives of the Seller and Buyer
f. the Seller is permitted to assign their rights under this Agreement to a third party, but the Buyer must first receive written consent from the Seller if they wish to do the same
g. should any condition or term in this Agreement become invalidated by public policy, this will not affect the validity and execution of the remainder of the Agreement
h. legal action and the subsequent apportionment of Attorney costs, for example to interpret or reinforce any of the terms of this Agreement, is to be avoided, with mediation by __________, the nominated Mediator, the preferred option instigated by a written request by either the Seller or the Buyer
7. Business continuity
The Seller agrees to:
a. take the necessary actions to ensure "business as usual” following the sale and prior to the formal handover of Assets to the Buyer
b. (optional) provide _____ days of consultancy time following the sale as part of the Purchase Price to facilitate a smooth transition of the business to the new ownership. Further days consultancy shall be chargeable at $____ per day
c. (optional) remain within the business for a period of ____ months following completion of the sale (clearly state here the conditions, whether full or part time, the specific role, and payment terms)
8. Access to business information
The Seller and Buyer shall agree where necessary to execute and deliver the documents, information, instruments and evidence reasonably required to carry out the intent and purpose of this Agreement. This will be at the Seller and Buyer’s own expense.
9. Non-compete agreement
The Seller agrees not to compete with the Business by engaging in the same or similar type of business within the ______________ geographic area for ______ years from the date of signature on this Agreement.
The Seller hereby confirms that this Agreement is contingent on the following conditions being met (insert others as necessary):