Asset Purchase Agreement Template

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Updated May 23, 2022

An asset purchase agreement, or “APA“, is a legal document that allows a business to sell its tangible or intangible property to another party (buyer). Common items sold include equipment, machinery, customer lists, trademarks, patents, etc. An asset purchase can only be used for the purchase of assets, without liabilities, from the business.

Table of Contents

What is an Asset Purchase?

An asset purchase is the act of a buyer purchasing all or a portion of a business’s assets. Depending on the asset, the seller may be liable to pay ordinary income tax or capital gains depending on the assets sold.

Asset Purchase vs Stock Purchase

In an asset purchase agreement, the buyer obtains the business assets only (with no liabilities) and in a stock purchase agreement, the buyer assumes ownership of the business assets and liabilities.

Difference Asset Purchase Stock Purchase
Tax Treatment Capital assets are taxed as capital gains, other assets are taxed as ordinary income. Taxed as a capital gain to the seller.
Tax Basis Assets get adjusted to fair market value Assets do not adjust to fair market value
Business Liabilities Do not transfer to the buyer Transfer to the buyer

Real-World Difference

In October of 2015, Walgreens agreed to a stock purchase agreement with Rite Aid for $9.4 billion in cash. Under the deal, Walgreens would take ownership of all assets and liabilities of Rite Aid.

Although, after the FTC blocked the sale, the parties converted to an asset purchase agreement so Walgreens could purchase a portion of Rite Aid’s stores only. In June 2017, Walgreens agreed to purchase 2,186 of Rite Aid’s 4,650 stores for $5.175 billion.

Conclusion

The deal changed because Walgreens’ primary goal was to accumulate more stores. Therefore, Walgreens’ only option was to convert to an asset purchase agreement to solely buy as many Rite Aid stores as the FTC allowed.

Capital Gains

Capital gains is the profit made on the sale of an asset when selling for a higher price than the original purchase. The IRS categorizes capital gains into 2 types, short-term and long-term (Topic no. 409):

  1. Short-Term – For assets that are owned for a year or less. Taxed as ordinary income (10% to 37%).
  2. Long-Term – For assets that are owned for more than 1-year. Tax brackets depending on the seller’s income:
    • 0% – Income less than $78,750
    • 15% – Income $78,750 to $434,550
    • 20% – Income more than $434,550

What is a Capital Asset?

A capital asset is classified by the IRS (page 20) as:

  • Stocks and bonds;
  • Real estate (residential or investment);
  • Household furnishings;
  • Vehicle;
  • Personal property;
  • Jewelry; and
  • Precious metals (gold, silver, etc.).

What is NOT a Capital Asset?

  • Inventory;
  • Accounts receivable from a barter agreement;
  • Real estate used by the business; and
  • Patent, invention, model, design, copyright, trademark, or similar intangible properties.

Sample Asset Purchase Agreement

Download: Adobe PDF

How to Write

Download: Adobe PDF, MS Word, OpenDocument

I. The Parties

(1) Date. Submit the calendar date when the conditions of this agreement first become active where requested by the First Article.

(2) Buyer. The Purchaser of the concerned assets should be identified in the “Buyer” section of Article I. The legal name of the Purchaser or Buyer will be required, therefore, if a Business Entity, furnish any needed abbreviations and status suffix as needed. Once the legal name of the Purchaser (or Buyer) has been reported continue to the next line where the official mailing address for the Purchaser should be recorded.

(3) Seller. The Entity that will relinquish control or ownership over the assets discussed in this agreement must be named as the “Seller” where requested. Furnish the complete name of the Asset Seller where requested then document this Entity’s legal mailing address.

II. Tangible Assets

(4) No Tangible Assets. The assets being sold through this agreement must be described. If none of the assets may be considered tangible or physical (i.e. machinery, property, etc.) then the checkbox attached to the label “No Tangible Assets” should be marked.

(5) Tangible Assets. If any of the assets being purchased can be considered physical property or tangible then the second checkbox should be marked and each physical asset being sold must be defined in the space provided. This should be a record of the physical property that is trading hands through this purchase and must contain the information needed to identify each item along with its individual worth. Any product or manufacturer identification numbers attached to an asset should be used when identifying it for the purpose of this statement.

III. Intangible Assets

(6) No Intangible Assets. If the purchase being discussed involves no physical property then the first checkbox (“No Tangible Assets”) should be selected.

(7) Intangible Assets. If there will be intangible or nonphysical assets being sold through this agreement then the second checkbox option in Article III should be marked. Additionally, every intangible asset that shall trade hands from the Seller to the Buyer must be defined in the space available. All intangible assets that will be purchased by the Buyer should be listed with the name of the Institution or Organization currently holding the asset, its identification number (I.e. account number, membership number, etc.) and the individual monetary worth of each such intangible asset.

IV. Purchase Price

(8) Price Of Assets. Locate the blank space in Article IV then document the exact dollar amount that the Seller must receive to release ownership or control of the assets being sold.

V. Deposit

(9) Not Required. If a deposit will not be required of the Buyer to enter this agreement then the first checkbox must be chosen from the Fifth Article.

(10) Required Deposit. If the Buyer must deliver a deposit to the Seller in order to enter this agreement then the “Required” checkbox should be marked (in Article V) and the dollar amount making up the deposit must be dispensed to the blank line between the dollar symbol and the label “Deposit.”

(11) Non-Refundable. If a deposit will be required of the Buyer then it will be necessary to indicate whether it will be returned or not upon the completion of the purchase. If the deposit will not be refundable and will be retained by the Seller permanently then select the “Non-Refundable” checkbox found in the Fifth Article.

(12) Refundable. If the deposit will be returned to the Buyer upon the completion of this agreement and the sale it represents then select the “Refundable” checkbox.

VI. Inspection

(13) Shall Be. If this agreement must call for a certain period of time to be reserved for an inspection of the assets being sold then the “Shall Be” checkbox, in Article VI., must be marked and the number of days that will be reserved for an inspection of the assets should be documented on the blank line this statement contains.

(14) Shall Not. If both the Parties agree that an inspection of the assets will be unnecessary and not required, then the “Shall Not” checkbox in Article VI must be selected.

VII. Payment

(15) At Closing. If the purchase price (defined earlier) must be paid to the Seller at the closing of this sale, then the first statement in Article VII must be selected.

(16) By Owner Financing. If the Buyer intends to finance this sale through the Owner (Asset Seller) then the second checkbox in Article VII must be selected. This option will require some additional definitions to be documented.

(17) Down Payment. If the financing for this sale will be sourced from the Seller then the “Down Payment” that the Buyer must submit at closing should be recorded.

(18) Interest Rate. The interest rate on the financed amount that will be payable by the Purchaser (Buyer) with each payment must be recorded on the line preceding the “%” symbol.

(19) Term. Naturally, the Seller will wish repayment on the financed amount within a specific period of time. Produce the number of months or years that the Buyer will be given to pay back the loaned amount then indicate if the number reported is in “Months” or “Years” by marking the appropriate checkbox.

(20) Payment Due. The calendar date of the month when the Buyer’s finance payment must be received by the Seller should be documented in Statement (D).

VIII. Financing

(21) Not Contingent. If the asset sale will not be dependent upon the Purchaser’s ability to obtain financing then select the “Not Contingent” checkbox from Article VIII and supply the number of days after this agreement’s effective date when proof of the Buyer’s funds for the asset sale must be shown to the Seller.

(22) 3rd Party Financing. If this asset sale may only proceed if the Buyer is able to obtain 3rd Party financing then mark the second checkbox presented in the Eighth Article. Once done, supply the number of days given to the Buyer to produce proof (to the Seller) that he or she has obtained 3rd Party financing in the form of a pre-approval letter from a Lender that the Seller considers reliable and established.

(23) Seller Financing. The third statement should be selected from Article VIII if the asset sale will only proceed upon the Buyer gaining financing (directly) from the Seller. If this is the case, proof of funds must still be obtained by the Buyer for the Seller and must be presented within a predetermined number of days of the effective date of this agreement. Provide this number of days in the space provided by this checkbox statement.

IX. Approval Of 3rd Party

(24) No Requirement. In some cases, separate approval from the Owner of the assets, Co-Owner of the assets, or some other 3rd Party will be required. If this will not be a requirement of this agreement then the “No Requirement” checkbox must be marked.

(25) Requirement. If a 3rd Party must approve the sale of these assets so that this sale may be closed then the checkbox labeled “Requirement” in Article IX must be marked. In addition to this selection, the legal name of the 3rd Party, whose approval is required, must be documented where requested.

X. Closing

(26) Date Of Closing. Document the exact date of the closing in Article X. This will be the date when the payment the Seller requires for the sale of these assets will be received, Two spaces have been formatted for this purpose.

(27) Time Of Closing. After recording the date of this sale’s closing, furnish the time of that day when the closing will occur. Make sure to select the “AM” or “PM” box to indicate the part of day when the closing time for this sale will occur.

XI. Closing Costs

(28) Both Parties. If each Party will pay for the closing costs he or she will be responsible for then, select the “Both Parties…” checkbox.

(29) Buyer. Select the second checkbox statement from Article XI if the Buyer will pay for the closing costs the Seller would normally be responsible to pay as well as his or her own costs for closing.

(30) Seller. If the Seller shall assume all the costs of closing (even those that the Buyer is obligated to pay) then select the third checkbox statement presented.

XVI. Transfer Of Assets

(31) Period Until Closing. In a case where the assets being sold are damaged or lose a significant amount of value between the time of this agreement’s execution and the closing date, a certain number of days may be allotted to the Seller to negotiate a reasonably adjusted price for the damaged assets lest the agreement is terminated. Produce this number of days on the space provided in “(B) Period Until Closing” (found in Article XVI).”

XIX. Governing Law

(32) State Of Enforcement. A record of the name of the State where this agreement will be enforced and governed must be made in Article XIX on the blank space provided.

XXI. Additional Terms

(33) Provisions To Agreement. While the content of this agreement has been standardized to apply to the majority of asset sales, Article XXI has been reserved for any specific agreements that have been made between the Seller and Buyer that both wish included in this contract but have not been discussed thus far. Produce any and all such additional provisions to this contract that the Buyer and Seller wish included in Article XXI.

XXII Entire Agreement

(34) Seller’s Signature And Name. The Seller must enter this agreement by signature to verify that the information is accurate and that he or she will comply with the conditions above. He or she must sign the “Seller’s Signature” line and then provide his or her printed name on the line below it.

(35) Date. The current date must be documented by the Seller when he or she signs this paperwork.

(36) Buyer’s Signature And Name. The Buyer must prove that he or she will accept the conditions and terms of this contract by signing his or her name in the space labeled “Buyer’s Signature” then by printing his or her name on the line “Print Name” below.

(37) Date. After signing, the Buyer must present the date when he or she completed the signature process required to execute this paperwork.