What is an asset purchase agreement?

Businesses in Baton Rouge and other cities across the nation have to make minor and major decisions regarding the best interest of the business. In most cases, these decisions are made to keep the business thriving well into the future; however, this does not always mean that the business will remain as it currently is. For some business owners, selling a business is the proper step to take, but this process can be confusing and time-consuming. Thus, some companies opt to just sell a business asset; therefore requiring an asset purchase agreement.

What is an asset purchase agreement? This agreement is a legal document that details all the assets being sold from one business to another. This document is a contract that is prepared and signed prior to closing on the deal. Along with this document, other important and essential documents are also included. This frequently involves a broker or finder agreement, letter of intent, exhibits to asset purchase agreement, which includes a list of assumed contracts, list of assumed liabilities, security agreement, disclosures, warranty claims and other pertinent documents.

An asset sale differs from a business acquisition or merger because in an asset sale, only the assets of one business are transferred to the new owner, which does not transfer the actual ownership of the business. If a business is selling its assets in order to keep its operations going, businesses will often sell fixed assets when these assets have no further value to the business.

Whether a business is selling its assets to keep a company afloat or is simply making logical business decisions to reduce fixed assets without value, it is important to understand the process of selling business assets. Additionally, it is crucial that both parties are aware of the contents of any documents signed -- such as an asset purchase agreement -- ensuring that the sale goes as planned.

Source: Findlaw.com, "Completing an Asset Sale," accessed Oct. 9, 2016

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