Buying a business in Florida is undoubtedly one of the most exciting experiences anyone may have in their lives. Nevertheless, managing and succeeding with a business is not an easy task, especially due to all the paperwork and details involved in the process.
One of the fundamentals behind a successful start for your newly acquired business is the Asset Purchase Agreement. This tool will help you to ensure that you have not only the assets to operate the business, but also serve as a hedge against unforeseen issues.
In this article, we show the basic elements behind a solid Asset Purchase Agreement in Florida.
Understanding Asset Purchase Agreements
An Asset Purchase Agreement, also known as APA, is an agreement between a buyer and a seller that finalizes terms and conditions related to the purchase and sale of a company’s assets.
This type of business agreement tends to be complex, so it is not uncommon that its negotiation and finalization require more time to materialize. Usually, once both parties involved in a business sale transaction are decided to take it seriously, they engage expert attorneys to negotiate on their behalf.
Procedures Involved In Asset Purchase Agreements – Step-by-Step
The process required for an Asset Purchase Agreement has several steps to fulfill. Usually, the purchase agreement will provide the deadlines for completing each step.
First, the buyer and the seller have to negotiate the asset purchase agreement, which may involve various offers and counteroffers until both sides find a common ground. At this moment, the assistance of an expert attorney can play a major role in the transaction’s outcome.
Once the asset purchase agreement is signed, the buyer then will need to deliver earnest money. For those unaware, earnest money is a deposit made to a seller that represents the buyer’s good faith to buy a property or company.
Commonly, the value of this deposit is around 5-10% of the purchase price. Thus, both parties can agree in the contract to a chosen fixed amount or percentage.
The next step is essential, as the seller will proceed to provide disclosures about core parameters regarding the business. This sum of information may include the business’ asset and real property, stockholders, subsidiaries, employees, insurance policies, outstanding debts, permits, and licenses, etc.
At this phase, the buyer can perform a detailed due diligence in the business. This procedure will help in investigating the claims and disclosures made by the seller. Besides, you can ask questions and inspect the property, equipment, and other assets of the company.
In case the due diligence goes well, the business agreement can go further. Buyers who want to acquire the business with financing will have some period to obtain a loan commitment from a lender.
Once the financing is secure, both parties can schedule the closing of the purchase agreement. Last, in the moment of the closing, the buyer will deliver the agreed funds to the sellers. The seller will provide the necessary documents, as well as the property and keys.
The Essential Terms of an Asset Purchase Agreement in Florida
Various essential terms must be specified in every asset purchase agreement signed in the state of Florida. These terms include:
- All required information about the parties involved in the agreement.
- The purchasing price of the company.
- Assets included in the transaction.
- Assets excluded from the transaction.
- Warranties and representations.
- Timeline for each party’s tasks and finalizing the agreement.
Although it is possible to find template agreements and standardized documents that cover all essential items, the best approach is to adjust the agreement to your needs.
It is not uncommon to see company buyers simply filling in the blanks on an Asset Purchase Agreement with no strategic approach. However, this type of behavior may cost a lot when it comes to protecting your interests.
A Reliable Business Attorney is Essential
A seasoned business attorney from Jurado & Farshchian, P.L. will help you throughout all the process, which includes the negotiation, contract reviews, and, most importantly, the protection of your best interests.