Regardless of the size, a business sale is a huge undertaking. This explains the importance of safeguarding your legal interest when buying or selling a business.
A business Sale and Purchase Agreement (SPA), also known as the Business Transfer Agreement is a legally binding contract that outlines the terms of the sale. It basically sets out the agreed elements of the sale as well as the important legal framework that is going to govern the sale process.
Why do you need a business purchase agreement?
Whether you are buying or selling a business, it is important that you understand what you are getting into. Having sound knowledge of the business transaction process, as well as the components of the sales contract, can help you protect your rights and ward off potential problems down the road. A business purchase agreement serves the following functions:
- Enable both parties to settle on the terms of the contract
- Stipulate any restrictive clauses such as confidentiality and non-disclosures and ensure that both parties abide by the stipulated restrictions
Important clauses to include in the business purchase agreement
The parties to the contract — The sale contract must clearly indicate the identities of the parties to the contract. This will eliminate potential confusion or the possibility of either party avoiding liability should things go wrong.
The business on sale — The contract should also clearly define the business in question as well as all the assets and liabilities at the time of the transaction.
The sale terms — This clause specifies how the buyer will pay for the business they are purchasing. This can be in the form of cash, check or credit card. And if agents or financial institutions are involved, this too should be included in this section.
A written contract is the basis of any business relationship. Find out how a well-written business sale contract can help you protect your rights when buying or selling a business.