If you are structuring the sale as an asset purchase, you need to know what should be covered in the asset purchase agreement.
You’ll also want to know what pitfalls may be lurking in the transaction.
The experienced Texas asset purchase agreement lawyer at The Curley Law Firm can help you avoid surprises and unnecessary liabilities.
When you buy or sell a business, you may structure the transaction in numerous ways. For example, you may choose to use an asset purchase, a stock purchase, or a merger.
In an asset purchase in Texas, the buyer acquires all or part of a business’s assets. This can include inventory, equipment, office buildings, account receivables, and customer goodwill. The seller, however, retains ownership of the business entity and most, if not all, of its liabilities and debt.
In many cases, an asset purchase allows the buyer to obtain the valuable parts of a business without taking on its problematic or unprofitable aspects. Because debt and liabilities generally are excluded from an asset purchase, you may spend less time and effort on pre-purchase due diligence. Asset purchasers also experience numerous tax advantages and more flexibility than other types of business sales.
An asset purchase agreement is the legal document that will govern the transfer of ownership of a business’s assets from the seller to the buyer. It should address all details of the asset purchase, including:
In addition to the asset purchase agreement, you often will need to attach exhibits to the agreement to provide more detail about the transaction. For example, you may need to list each piece of equipment included in the sale. You also want to provide details to identify the equipment, such as make and model, serial numbers, date of original purchase, value, warranties, etc.
Alternatively, you may need to list existing contracts that will be assigned to the buyer, name employees transferring to the buyer’s entity, or disclose licenses, permits, and liens. In short, your asset purchase agreement and its exhibits should leave no doubt as to what is and is not included in the asset purchase. You shouldn’t leave items unaddressed as that can lead to uncertainty and potential conflict and liability.
If the buyer or seller does not carry through with any material part of the asset purchase agreement, they may be liable for breach. What types of failures may be deemed a breach? Perhaps the seller transfers different, less valuable equipment than was specified in the agreement. Or maybe the buyer fails to make a payment on specified dates. In other cases, the breach may be less obvious, such as failing to disclose a material term or damaging customer goodwill.
If one party breaches a Texas asset purchase agreement, the non-breaching party may seek to recover monetary damages or other legal and equitable remedies. Remedies may include:
In many cases, you will set forth available remedies within the asset purchase agreement. You also should spell out whether a breach will be handled in court or through a private mediator or arbitrator. The Curley Law Office can help protect your rights in case of an asset purchase agreement breach.
At The Curley Law Office, we bring over a decade of business formation experience to counsel business buyers and sellers. To ensure that an asset purchase is the best transaction for your business, consult us as soon as you begin exploring the sale. Then, when you are ready to commit to a deal, contact us to draft your asset purchase agreement in Texas. We will work through all aspects of your deal to protect your legal rights and remedies in your asset purchase agreement.
