Sale of Business Contract: Everything You Need to Know
A sale of business contract is a legal agreement that finalizes the transfer of a business from one party to another.3 min read
2. Key Details of a Sale of a Business Contract
Sale of a Business Contract Overview
A sale of business contract is a legal agreement that finalizes the transfer of a business from one party to another. It defines the terms of the agreement, details essential information pertaining to the business being sold, and is the major record for the business transaction. Such a record is required by state and local governments as proof of business ownership, and it is also necessary for the business registration process. Selling or buying a business can be a long, complicated process, especially for larger and more complex businesses. To help facilitate such a transaction, consulting with an attorney, sales advisory board, or sales broker is often recommended.
Key Details of a Sale of a Business Contract
When engaging in a sale of business contract, it is important to make sure all the necessary details have been covered correctly, lest the agreement in part or in whole be rendered unenforceable in a court of law. Some important aspects to consider when drawing up a sale of business contract include:
- The Parties Involved. In a sale of business contract, both parties should be aware of all the details of the contract and what those details mean. Also, both parties should be correctly listed in the contract so as to avoid confusion or one party escaping liability on a technicality.
- The Items for Sale. All items to be included in the sale should be listed and described in detail. Such items could include any physical assets and business records, the business name, trademarks, patents, licenses, royalties, recipes, formulas, trade secrets, logos, inventory, databases, and any other material that is integral to the business. Liabilities such as loans, debt, and accounts payable should also be included.
- The Disclosure Agreement. A disclosure agreement should be included so as to require both parties to disclose any debts, fines, lawsuits, legal obligations, or other encumbrances that may be included in the deal. This will protect the buyer from any liabilities that may come with the business and protect the seller from dealing with a buyer with bad credit.
- The Sale Terms. These define how payment or payments for the sale will be made and what the date or dates of such payment or payments will be. This will include whether the payments will be made by cash, credit card, check, etc.; if the sale will be financed and if so what the interest rate will be; and if a deposit will be required. Any agents, brokers, or financial institutions involved in the sale should also be listed. Both parties should report the sale of the business to the IRS in a timely manner.
- The Adjudication Process. How any legal disputes will be resolved should be set out in detail, including the legal jurisdiction any dispute should be resolved in and whether it will be done so through litigation or arbitration. Acts or conditions that would constitute a breach of contract should also be stated.
- The Confidentiality Agreement. Both parties should agree through a non-disclosure agreement (NDA) not to disclose any sensitive information or information that might be detrimental to the parties involved. Information considered confidential would be any information obtained through the agreement, and this information should remain confidential through the length of the agreement and perhaps after.
- The Third Party Considerations. The contract should stipulate that no agreement should be made with a third party pertaining to the business transaction unless written approval for it is given by both parties. It should also be stipulated that benefits obtained from the sale should go to the parties listed in the agreement, not any third party.
- The Notifications. How the two parties may contact each other for contract-related business should be listed. The ideal method should be in writing with delivery either done by certified mail or in-person, thereby to maintain a comprehensive record of any interaction.
- The Signatures. No contract will be finalized and binding until the parties involved or their representatives have signed and dated the document. Each party should have their attorney review the document before signing, and copies of the document should be kept by both parties. All documents should be notarized by a public notary, and including a witness signature may also be recommended for both parties.
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