Business Purchase Agreement (BPA) Template

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Updated June 23, 2022

A business purchase agreement (BPA) is a legal document between a buyer to acquire the full ownership of an entity from a seller for a sales price. All assets and liabilities held by the business will be transferred from the seller to the buyer on the closing date.

A business purchase agreement can be set up as an asset purchase or a stock purchase.

What does it include?

  • Tangible or intangible Assets;
  • Shares of stock;
  • Due diligence period;
  • Liabilities;
  • Non-compete; and
  • Leasehold interests.

Table of Contents

Do I Need a Business Purchase Agreement?

Often times a transaction will involve the purchase of an asset and not the business in its entirety. To know whether to use a business purchase agreement, the answer must be “yes” to each question in the 3-point test.

3-Point Test

1. Will all aspects of the business continue normally after the sale?

2. Will the business continue to be incorporated under the same governing law?

3. Will all liabilities (such as debts and leasehold interests) be transferred to the buyer?

An Asset Purchase Agreement is recommended if the answer is no to any of the 3 questions. For example, if a website business is being purchased, the buyer buys the website’s assets, not the entire business entity.

If the answer is “yes” to all 3 questions, but only a percentage of the business is being purchased, a Stock Purchase Agreement is recommended. For example, only 1 partner in a 50/50 partnership decides to sell their shares.

How to Buy a Business (5 steps)

1. Conduct Due Diligence

The buyer should gather all necessary documents of the business, including:

  • A list of all tangible and intangible assets;
  • The liabilities, including property leases and debts;
  • All internal documents and government records;
  • Current payables and receivables;
  • Tax records for the past 3 years; and
  • Profit and loss statements.

After obtaining such information from the seller, a financial value can be placed on the business.

2. Get an Appraisal

Hiring a business broker or appraisal company can be useful to get the value of a business. Depending on the industry, the business will commonly trade at a multiple of its profit or revenue.

  • Finding a Local Broker

A business is commonly sold on a local level. Therefore, it is recommended to contact a local business broker listed with the International Business Broker Association (IBBA).

3. Make an Offer

The buyer should structure a business purchase agreement that encourages the owner to sell.

This should include:

  • A “good faith” deposit. This can be non-refundable based on any outstanding contingencies.
  • Purchase price. The total amount paid to the seller for the business entity.
  • Closing date. Usually, within 30 days when the purchase price is paid to the seller and the business is transferred to the buyer.
  • Confidentiality. Both parties cannot share the agreement’s details with a 3rd party.
  • Non-compete. Requires that the seller cannot open a similar business within the same market for a specified period of time.

4. Sign an Agreement

The agreement is not legally binding until all parties have signed. After an authorized agreement has been made, the buyer can begin their inspection and due diligence before closing.

5. Closing

The closing date is when the parties exchange the cash for the ownership of the business. For transferring stock, the seller will sign over the names on the certificates. For transferring assets, ownership and possession should be handed over on the closing date.

Common Terms (5)

Counter-offer. When the buyer or seller wants to make a change to the other party’s offer. The counter-offer will then be sent to the other party for acceptance.

Deposit. The initial payment is made towards the final sales price of the business.

Non-compete. The seller can be prohibited from engaging in the same business after the sale of the business.

Non-operating costs – Expenses not directly related to the costs of the business such as interest on debt, moving costs, payments to settle lawsuits, etc.

Operating costs – Expenses that are directly related providing goods or services to customers. This includes costs related to materials, labor, transportation, etc.

Frequently Asked Questions (FAQs)

What are Tangible Assets?

Tangible assets are physical items that you can “touch and feel.” Examples include equipment, vehicles, hardware, etc.

What are Intangible Assets?

Intangible assets are non-physical items that hold value. Examples include trademarks, copyrights,

What is EBITDA?

EBITDA means earnings before interest, taxes, depreciation, and amortization and is a metric used to determine the value of a business.

CAR Version

California Assoc. of Realtors Business Purchase Agreement

Download: Adobe PDF

 

 

 

How to Write

Download: Adobe PDF, MS Word, OpenDocument

I. The Parties

(1) Formal Date Of Binding Effect. The exact calendar date when the obligations this agreement places upon both Business Buyer and Business Seller will need to be established in the First Article. Utilize the formatted space provided to record the first calendar date when the requirements and obligations for this transaction must be complied with by these Parties.

(2) Purchaser Of Business. The Purchaser or the Buyer of the Business must be attached to this document by name in Article I. Produce the legal name of this Party. If the Purchaser is a Business Entity unto itself, then make sure its legal name as cited by its articles or formation, operating agreements, and government paperwork is finished to the first line of the “Buyer” section.

(3) Address Of Buyer. The mailing address where the Business Buyer will reliably receive all communications regarding this transaction and the paperwork defining it should be dispensed to the second available space of the “Buyer” section.

(4) Seller Of Business. The entire name of the Business Seller requires production on the first line of the “Seller” section. This is the Party who shall release ownership over the Business Entity being sold in this transaction once his or her requirements for this purchase have been met. Should the Business Seller be an Entity such as a corporation, then it’s legal identity as known to Government Entities (i.e State Department, I.R.S.) should be furnished to this area.

(5) Address Of Business Seller. The mailing address where all notices, requests, paperwork, and correspondence regarding the sale of the concerned Business and this contract will be received by the Seller must be produced in the “Seller” section. The final blank space in this section has been reserved for the production of this information.

II. The Business

(6) Entity Being Sold. The formal name of the Business that shall be sold to the Buyer requires documentation in the Second Article. Furnish this name precisely as it appears when it is identified in its government paperwork. For instance, if the Business is a Limited Liability Company, then the name it formed under in its articles of organization should be dispensed to the “Entity Name” line.

(7) Entity Mailing Address. The Business being sold must be identified with some supporting information for the purpose of this paperwork. To this end, continue to the second available line in Article II, then record the entire (legal) mailing address of the Business Entity that shall be purchased by the Buyer through this agreement.

(8) State Of Incorporation/Organization. Naturally, the Business being sold here will have formally originated at one point in the past in a specific area. Produce the name of the State where the concerned Business Entity was legally formed. For example, if the concerned Business Entity is a corporation, then identify the State where its articles of incorporation were submitted (and approved) on the third line in Article II.

Select Item 9 Or Select Item 10 Or Select Item 11 Or Select And Complete Item 12

(9) Corporation. It will be important to appropriately classify the type of Business Entity that shall be sold and purchased through this agreement. Therefore, one of the items under “Entity Type” must be selected. If the Business Entity being sold has been identified as a corporation and has maintained this status from the approval of its articles of incorporation, then the first checkbox under “Entity Type” must be selected.

(10) Limited Liability Company (LLC). Select the second checkbox from “Entity Type” if the Business Entity being sold has filed its articles of organization and remains so at the time of this sale.

(11) Partnership. If the Business Entity is owned by two or more Parties through a Partnership agreement and/or has fulfilled any name registration requirements imposed by the State where it was formed, where it operates, and whose jurisdiction requires compliance then select the third check box.

(12) Other. If the Entity type cannot be defined by any of the above statements, then select “Other” and classify the Business Entity being sold on the space available. Keep in mind, this entry should represent the category assigned to the Business by Entities such as the I.R.S., Department of Revenue, and the State Government of its formation.

III. Acquirement

Select And Complete Item 13 Or Select And Complete Item 16

(13) Assets Of The Business. In addition to obtaining the power over the Business being sold that its articles of formation or active operating or partnership agreement grants to the Business Owner, it will be necessary to establish which assets, if any, will also be transferred to the Business Buyer. If the sale of the Business will be conducted through the sale of the tangible and intangible assets under its control, then select the “Assets Of The Business” checkbox.

To Complete Item 13: Select Item 14 Or Select And Complete Item 15

(14) All Tangible And Intangible Assets. If every asset of the Business will be purchased including all physical and non-physical assets or property belonging to or under the control of the Business Entity being sold, then the first checkbox available on this topic (“All Tangible And Intangible”) must be selected.

(15) Specific Assets. If some asset will not be sold to the Buyer in this agreement then select the “Specific…” checkbox. Once done, list every asset of the Business Entity that shall be sold to the Buyer in this agreement on the “Included Assets” line then document all the assets of the Business Entity that will not be included in this agreement and therefore not be sold to the Buyer on the “Excluded Assets” line.

(16) Shares/Stock Of The Business. If the Business Seller intends to transfer ownership over the Entity by selling its stock to the Buyer, then select the “Shares/Stock Of The Business” checkbox. In addition to making this selection, the number of shares or percentage of the total available stock being sold must be documented on the first line available while the class and series of the shares being sold must be furnished on the second blank line of this checkbox option.

IV. Liabilities

Select Item 17 Or Select And Complete Item 18

(17) No Liability. If the Purchaser of this Business will not be assuming any of the Business Enitity’s existing liabilities other than that mentioned by the provided language of this paperwork, then select the “No Liability(ies)” checkbox.

(18) Some Liability(ies). If the purchase of this Business will only require that the Buyer assume responsibility for some of the Business’s liabilities but not all, the second checkbox will need to be selected from Article IV. This selection will bear further discussion so that each liability that will be assumed by the Buyer is reported accurately.

(19) Accounts Payable. If the Buyer, upon the successful purchase of the concerned Business Entity, will be responsible to pay any and all debts owed for the supplies and services owed by the Business Entity (for its daily operation), then the “Accounts Payable” checkbox must be selected.

(20) Past And Current Business Expenses. Mark the second checkbox under the “Some Liabilities” section if the Buyer will be held responsible to pay for all of the past and current “Business Expenses” used by the Business’s employees that were required for its operation.

(21) Contract Obligations. If the Business Buyer agrees to fulfill all the current requirements and conditions placed upon the Business Entity by all its existing contracts for the full term of each such contract, then select the third checkbox (“Contract Obligations”). It is strongly recommended that every contract held by the Business being sold is disclosed and fully comprehended by the Buyer before this selection is made.

(22) Leasehold Interests. The lease held by the concerned Business Entity may carry serious penalties if it is violated, even in the event of this transaction. Thus, if the Business Buyer agrees to uphold the current “Leasehold Interests” of the Business, then the fourth checkbox on this list must be selected. Keep in mind, this will obligate the Business to complete its current lease regardless of the impact this would have on the Business Entity being sold.

(23) Legal Liabilities. If the Buyer intends to comply, satisfy, and/or fulfill all the Business Entity’s liabilities that were assigned by a court of law or gained by penalty, then the “Legal Liabilities” checkbox must be selected from this list.

(24) Past And Current Taxes Owed By Business. To assign responsibility over all the taxes owed by the Business Entity being sold to the Buyer in this purchase, the “Past And Current Taxes…” must be selected. This will place any past and current tax procedures and liabilities the Business Entity must satisfy under the responsibility of the Business Buyer once this purchase is complete.

(25) Payroll (Past And Current). All pay owed to the Business Entity’s Employees, Contractors, and similar Parties can be assumed by the Buyer if the seventh checkbox is selected.

(26) Other. All other current and unmentioned liabilities carried by the Business being purchased that will be assumed by the Buyer must be documented. If there are any remaining such liabilities that have not been discussed thus far, then select the box labeled “Other” and define the liability amount, the name of the Entity the Business owes the liability amount to, and the nature or reason this amount is owed on the blank space provided after the word “Other.” Three distinct checkbox options labeled “Other” have been supplied since each type of the Business’s liability that would be assumed by the Buyer through this purchase must be detailed separately. Only the checkboxes that are marked and supplied with the requested information will be considered part of this agreement.

V. Purchase Price

(27) Formally Determined Purchase Price. The amount of money that the Seller expects the Buyer to submit in exchange for ownership over the Business must be submitted to the Fifth Article in the space attached to the dollar symbol.

VI. Payment

Select Item 28 Or Select And Complete Item 29 Or Select And Complete Item 33

(28) In A Lump Sum. Since the payment for the Business Entity must be well-defined for the purpose of this document, the Sixth Article will need to be reviewed and completed. If the Purchaser will pay the Seller the full price of the Business with one payment, then mark the “In A Lump Sum” checkbox. If this is not the case, this checkbox statement should be left blank.

(29) With Multiple Payments. If the Purchaser shall submit payment for the Business as several payments across a span of time, then the checkbox labeled “With Multiple Payments” should be marked.

(30) First Installment. Produce the date when the first payment toward the purchase price of the Business Entity must be received by the Seller.

(31) Multiple Payment Schedule. If the Buyer will be submitting the full amount across multiple payments to be made separately, then the due date when these payments are to be received must be established. Notice the checkboxes presented in this statement (“Week,” “Month,” “Quarter”). Use the line before the words “Of Each” to document the two digit calendar date of the “Week,” “Month,” or “Quarter” when the payment will be due then select the appropriate checkbox. For example, if payment will be due once a week on the first calendar day of every week then supply the word “Monday” or the number “1” to the blank space and check off the box labeled “Week” whereas if the Buyer’s payment will be due on the fifteenth of every month, record the number “15” in the space provided and mark the box labeled “Month.”

(32) Final Installment Payment. The calendar date when the final payment required for the Business purchase must be submitted to the Seller should be furnished to the final area of this statement.

(33) Other. Generally, the above payment options are agreed upon by a Business Seller and Buyer, however should there be additional requirements or a specific schedule that must be followed and cannot be adequately detailed by previous options then the “Other” checkbox must be marked. If so, then the exact payment schedule and the information needed to fully define how, when, and the dollar amount(s) of every payment that must be submitted to the Business Seller must be furnished to the space following the word “Other.”

VII. Payment Methods

(34) Acceptable Methods Of Payment. The Business Seller and Business Buyer should agree on how the expected payment(s) must be submitted before this document is signed. To this end, locate Article VII, then select at least one of the options available to define what this agreement considers an acceptable method of payment. This article will allow for payments to be made with a “Bank Wire,” in “Cash,” by “Cashier’s Check,” or even with some “Other” method. Make note, that if the “Other” checkbox is selected then the exact method of payment must be defined.

VIII. Deposit

Select And Complete Item 35 Or Select Item 37

(35) Requires A Deposit. Generally, the above payment options are agreed upon by a Business Seller and Buyer, however, should there be additional requirements or a specific schedule that must be followed and cannot be adequately detailed by previous options then the “Other” checkbox must be marked. If so, then the exact payment schedule and the information needed to fully define how, when, and the amount(s) of payment(s) expected by the Business Seller must be furnished to the space following the word “Other.” For instance, if the Seller and Buyer agree to varying dollar amounts to one or more submitted as payment during the term of these installments then a calendar schedule listing the dollar amount that must be submitted as payment on each due date should be included when defining the multiple payments.

(36) Deposit Details. If a deposit will be required of the Business Buyer in order to proceed with this agreement’s transaction, then the exact dollar amount the deposit consists of must be recorded on the first line of the first checkbox statement found in Article VIII. Additionally, the number of days from the effective date, noted in the First Article, that will be allowed to the Buyer to submit this deposit amount must be documented on the second available space. This will act as a countdown in that, the Buyer only has the number of calendar days reported here after this agreement’s effective date to submit the deposit amount (to the Seller) lest this transaction be denied by the Business Seller.

(37) Does Not Require Deposit. If the Business Seller will not require (or accept) a deposit to continue with this agreement then, mark the second checkbox available in Article VII.

IX. Closing Date

(38) Completion Of Sale. The calendar date when the requirements for this sale must be satisfied should be furnished to the space provided in the Ninth Article.

X. Due Diligence Period

Select And Complete Item 39 Or Select Item 41

(39) Requires A Due Diligence Period. The Tenth Article will define whether the Business Buyer will be given a period of time (before the closing date) when he or she will be able to investigate and evaluate the Business being purchased. If this transaction will allow this period to the Buyer, then the first checkbox statement that is displayed in Article X should be selected.

(40) Deadline. If a period of due diligence shall be observed before this transaction may proceed to the closing, then a definitive deadline when the Buyer must formally approve or deny this purchase must be established. The first checkbox statement will require the exact date and time when the Buyer’s answer is due submitted. Begin by supplying the first two spaces with the date of this deadline. Additionally, the exact time of day when the Business Buyer must inform the Seller of his or her decision to approve or deny the purchase should be documented to the formatted space provided. This report will require that the “AM” box be selected if this time is between midnight and twelve noon or that the “PM” box is selected should this time be between 12 noon and midnight.

(41) Does Not Require Due Diligence. If the Business Buyer intends to waive the due diligence period and the Seller agrees that this would be appropriate, then the “Does Not Require” checkbox should be selected.

XI. Non-Compete

Select And Complete Item 42 Or Select Item 46

(42) Non-Compete Restrictions. Oftentimes, a Business will depend upon its proprietary or confidential information to remain competitive in its industry or on the market. If the Business being sold operates in such a way, then the Business Buyer may require that some protective restrictions be placed on the Seller. Such a non-compete condition will require that the Seller refrains from using his or her knowledge of the Business being sold to create an unfair level of competition on the market once it is the property of the Buyer. To institute such a precaution, select the “Non-Compete Restrictions” checkbox.

(43) Scope Of Work. Every industry can be defined through its products and/or services. For instance, a car manufacturer can potentially produce automobiles, the parts that make up the automobiles, and the accessories for those automobiles as well as generate the financing its Client requires to purchase its products. The type of work that the Seller must agree to refrain from working in and with for the duration of the non-compete restrictions placed on him or her through this transaction should be detailed on the “Scope of Work” line. Note, this may not be a general ban from an entire industry but should focus on topics such as specific services, products, proprietary information, and/or marketing strategies that must be forbidden to the Business Seller for the duration of this non-compete condition.

(44) Term. The non-compete requirements may only be imposed for a limited amount of time depending upon what is allowable by the State and Federal law(s) that govern the industry of the Business Entity being sold. Consult the currently applicable statutes to this paperwork and this transaction, then document the exact number of weeks, months, or years that the Business Seller will be bound by the non-compete conditions of this paperwork on the blank line provided by Statement B (“Term”).

(45) Geographical Areas. In most cases, the non-compete conditions of this transaction will only be applicable in specific geographical areas that the current laws deem appropriate to ensure a fair market. Report each geographical area where the non-compete conditions above will be imposed on the Business Seller on the blank space provided by Statement C. This report may be furnished by naming areas such as neighborhoods, cities, counties, or states where the Business Seller agrees to observe the non-compete conditions or by detailing a regional boundary in which the Business Seller agrees to comply with the non-compete conditions discussed.

(46) No Non-Compete Restrictions. If the Business Buyer does not require that the protection of a non-compete condition is imposed on the Business Seller or if this is simply inappropriate or illegal in the eyes of the law, then select the checkbox labeled “No Non-Compete Restrictions.”

XVI. Governing Law

(47) Jurisdiction. This agreement must remain enforceable by the laws of a specific State. Produce the name of this State as requested by the Sixteenth Article (“Governing Law”).

XIX. Additional Terms & Conditions

(48) Binding Agreements To Be Included. The signature provided to this contract will be considered binding and assumed to be submitted by each participating Party after each agreement made in this paperwork is reviewed and judged satisfactory. Therefore, any additional information, restrictions, or requirements that have not been documented in the previous articles but should be considered a part of this contract must be reported in Article XIX.

XX. Entire Agreement

(49) Buyer Signature And Name. The Business Buyer, or an Authorized Signature Party elected by the Business Buying Entity named in the FIrst Article, must sign and print his or her name to enter this agreement as the Purchaser or Buyer.

(50) Signature Date Of Business Buyer. The date when the Buyer signs and prints his or her name will be the date this contract formally obligates him or her to its term and conditions. Therefore, after signing, the Business Buyer must document the current date.

(51) Seller Signature The Seller of the Business must sign and print his or her name. In cases where the Seller is also a Business, a Signature Representative may be assigned by the Seller to enter the agreement for this transaction properly. This requires that the signature and printed name of the Business Seller or the Signature Representative of the Business Seller is submitted

(52) Signature Date Of Business Seller. The date of the Business Seller’s signature will establish when he or she has entered this agreement. This must be documented as part of the signature requirements of this contract.