Use our Asset Purchase Agreement template as a reliable foundation to help you make a valid document and complete a stress-free transaction of assets with another party.
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Table of Contents:An Asset Purchase Agreement is a legal document that formalizes the purchase of assets, without any liabilities, from another business.
An asset purchase occurs when a buyer acquires all or part of a business's tangible or intangible assets.
The agreement outlines all the terms and conditions of the sale and purchase. The details it includes are commonly the following:
Use our Asset Purchase Agreement Template to help you create the outline of your contract.
The IRS defines specific items as capital assets. These items include:
Trademarks and patents are examples of the types of items that are NOT capital assets.
For certain transactions, an APA is necessary. These situations include:
If you find yourself in one of these situations, you will need to use an Asset Purchase Agreement.
Before being able to purchase assets, the buyer needs to send a letter of intent to the selling business.
This will be the starting point of the deal, and then both businesses can begin to negotiate all the terms and conditions of the purchase.
Using an APA has advantages and disadvantages. Before using the document, familiarize yourself with how it can help and how you can remedy any disadvantage.
| Pros of an APA | Cons of an APA |
|---|---|
| Able to buy assets at fair market value. | Employee contracts could require a renewal. |
| You have the freedom to structure the purchase. | Specific permits and licenses might not transfer to the purchasing party without applying again. |
| Stay away from dilemmas with minority shareholders. | Any asset sold to the buyer below full market value may end in insufficient capital. |
| Ownership of specific assets is transferred exclusively. This can diminish any legal problems. | You must take part in the costly retitling process. |
Before taking part in a transaction, it is essential to understand the different elements of an Asset Purchase Agreement.
Take a look at the different parts of an APA below that you can use as an Asset Purchase Agreement checklist that ensures you include every detail.
To further clarify how to create your document, we have included the following steps.
Review the following parts of an APA to write your document correctly.
Include the date you are signing the contract in addition to the personal details of both you and the other party.
State the tangible assets in the transaction, as well as how much they are worth. If there are no physical items being sold as part of the sale, then select “No Tangible Assets.”
Include the non-physical assets in the transaction, as well as how much they are worth. If no intangible items are being sold as part of the sale, then select “No Tangible Assets.”
Include the amount the seller must receive to transfer ownership to the buyer.
Insert a space that provides information about a deposit that must be given to complete the transaction. It should include the amount of the deposit.
Also include an option of “Not Necessary” if no deposit is obligatory, and if it is refundable or not.
Fill in all the information regarding how the payment will be provided to the seller. It could be given at the closing or by financing, as well as the conditions that go with it.
Establish the interest rate, the term (period), and the due date (if being financed).
Include a section that makes a 3rd party’s approval necessary or not necessary to complete the transaction.
Enter a space for the date and time of closing information. This marks the moment the transaction will be finalized.
Specify which parties, if not both, will pay for the closing costs of the agreement.
Fill in the name of the state where the agreement will be enforced.
Enter any extra terms, which are any specific agreements that you and the other party have made together.
Enter the date you will sign the agreement. Also include your name and signature, as well as the name and signature of the other party.
When considering buying assets, you might have heard about stock purchases.
If you are wondering what the differences between stock and Asset Purchase Agreements are, you can review the table below to understand how to tell them apart.
| Stock Purchase | Asset Purchase |
|---|---|
| Taxed as a capital gain to the selling party. | Only capital assets are taxed as capital gains. All other assets are taxed as normal income. |
| Assets do not adapt to fair market value. | Assets adjust to fair market value. |
| Do not change over to the purchasing party. | Change over to the purchasing party. |
To help you write your document, you can have look at the example of an Asset Purchase Agreement that we have provided below.
Review the sample below to understand how to outline your document correctly.
There are legal documents you can use during this situation or during a similar circumstance regarding a purchase.
It is beneficial to know where to find the correct information and legal tools.
We have added the following related finance templates that you may need right now or in the near future.
Review these documents for more details regarding the legal processes of specific sales and payments.
To further clarify any doubts regarding Asset Purchase Agreements, LawDistrict has answered the following commonly asked questions.
Use the information to help yourself answer any lingering questions you may still have.
There are several ways you can get an Asset Purchase Agreement.
However, an effective way to get your form is to use our Asset Purchase Agreement template as a helpful foundation.
You can customize your form with the information related to your situation. Once prepared, a lawyer can review the document to make sure that it has been correctly drafted.
Thanks to our APA template, you can start the process of drafting an Asset Purchase Agreement.
Keep in mind that it’s recommended to ask a corporate lawyer for legal advice and revision once you have customized your form.
The problem that can occur with an APAis the negotiation involved. If you and the other party plan on negotiating by email, it could take a lot of time.
It may also lead to errors and litigation.
Transferring assets that need licensure or are subject to 3rd party contracts can also make the agreement more difficult to complete.
Be careful to avoid these problems when making your agreement.
