Business Purchase Agreement- More than a Handshake


For simple businesses, there is a simple way to purchase and sell.  Both the seller and the buyer would be fools to transfer the business on a hand shake or without a proper legal document.  The California Associationa of Realtors developed an excellent form document; Form BPA.  For relatively little expense, a business can transfer to a new owner with both the buyer and seller being protected by a well written legal document.  Lawyers, escrow companies, real estate brokers, etc… can open an escrow for the transaction.

Things to consider when buying or selling a business:

  1. Purchase price is not the only payment issue.  Most purchases are not all cash.  Decide on initial deposit, payment plan, interest rate, etc…
  2. Form of ownership of the business.  Corporation, LLC, etc…
  3. Inventory –  Many people say everything is included that has to do with the business.  GET IT IN WRITING.  Do an exhaustive inventory of the business assets.
  4. Consulting/ Training-  The purchaser is going to need answers from the seller.  Get that in writing.
  5. Agreement not to compete-  The purchaser does not want the seller to open a shop next door and compete.
  6. Lease, Purchase or Real Property-  Sometimes the real property is sold along with the business.  However, usually a lease is involved.  If the business location is important (retail, restaurant, etc…), the buyer should get a lease with the landlord during escrow.  The purchase should be contingent on the purchaser obtaining a lease.

MacFarlane Real Estate, Inc. handles business transactions.

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