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Applicable Asset Allocation Seller may find a modest tax advantage in tilting the allocation toward items that are taxed at capital gains rates rather than ordinary income rates. These items include covenants not to compete, real estate and goodwill.
Asset List This is where you list what you're purchasing. You can put the details, such as lists of equipment, on a separate page which is sometimes referred to in the body of the agreement as a schedule or exhibit and specifically made part of the contract.
Closing Agent & Escrow Agent It is imperative that the parties have a licensed professional oversee the legal and financial adequacy of the documents at closing to prevent problems down the road. Also important to segregate deposits and cash at close with independent escrow agent. (Like an attorney's trust account - preferably ours.)
Business Records & Financial Information Only give Buyer an opportunity to review those documents specifically requested.
Franchise Seller must determine under what conditions and circumstances he may sell or assign the franchise. Buyer should assume all required transfer fees. Get copy of franchise agreement. Seller will want a legal opinion letter attesting to the validity of the transfer.
Trademarks Seller may want to retain ownership rights and merely license the marks with or without royalties for a specific period of time.
Trade Name Seller transfers business name (DBA) to Buyer. If applicable, it agrees to change it's corporate name, which allows Buyer to/change it's corporate name to match name of newly acquired business.
Licenses & Permits Buyer is responsible for acquiring any and all applicable Licenses & Permits. All fees associated with the proper transfer of any license or permit shall be paid by Buyer. Seller shall not be responsible for Buyer's failure or inability to receive such license or permit. If Buyer cannot close for lack of license or permit, Seller shall retain all sums paid by Buyer as liquidated damages.
Assignment of Lease If applicable, Seller will assign lease to Buyer. If not, Buyer is responsible for locating business space. Failure by Buyer in acquiring a lease shall not void or otherwise permit Buyer to rescind contract. Security deposit held under any lease must also be accounted for in this agreement.
Bill of Sale Seller shall provide Buyer with a Bill of Sale reflecting valid transfer of title to all assets.
Taxes Buyer will want assurances that all taxes have been timely paid. Generally, sales taxes are treated as a lien on assets/inventory. Therefore, any taxes due, but yet unpaid will have to be dealt with. Include as prepayment by Seller.
Indemnification Seller will want to be indemnified by Buyer against any expenses/losses incurred by Seller as a result of Buyer's management of the Business assets.
Default In case of default by Buyer, Seller may have the right to rescind contract and retain all sums paid by Buyer as liquidated damages, and address default in non-binding mediation and thereafter, if necessary, arbitration.
Condition of Equipment/Assets Seller represents and warrants only that the items held for sale & assets are in good working condition and does not offer any other express or implied warranties related to the condition of the assets.
Inventories Any inventory of items held for sale & assets should be conducted by both parties.
Phone, Fax, & Mail Seller should transfer all phone lines and re-route all mail to buyer
Buyer's Restrictive Covenants Before the Buyer has been given access to any business information, Seller should always ensure that Buyer has signed a contract which contains provisions that restrict the Buyer's ability to compete against Seller; to solicit staff away from Seller; or to disclose any of Seller's confidential information to others. In addition, it is always wise to include a non-circumvention clause, which will prohibit the Buyer from taking any action that would or would attempt to get around these restrictions. An example of trying to circumvent the contract would be assisting or enabling a third party to compete, solicit or disclose. As always, ensure any such restrictive covenant is within statutory parameters.
Risk of Loss Risk of loss to any assets generally remains with Seller prior to close and flows to Buyer after close.
Severability In the event any part, portion or provision or paragraph of this Agreement is declared void or invalid, the remaining portions of this Agreement are not affected and remain in full force and effect.
Mediation and Arbitration Mediation and Arbitration should always specify a location in a convenient jurisdiction (preferably, in the same county where they run their business). Mediation is a non-binding way to settle the dispute quickly and amicably. If unable to settle in mediation, arbitration is first option available. Arbitration is the preferred alternative to litigation because of speed, cost, and ability to maintain low profile (no info is publicly available).
Governing Law Always stipulate that the contract will be governed under the law and jurisdiction where business is conducted. Always make sure that venue and jurisdiction are convenient.
No Modification or Waiver No modifications except those specifically agreed upon by the parties in writing. Any waiver of a term or provision will not act as a waiver of any other provision.
Entire Agreement This agreement constitutes the entire agreement of the parties and may be modified only in a writing executed by both parties.
Notices Notices should always list the current and best addresses where each party may contact the other for whatever reason.
There are many benefits to starting a business and
incorporating. Some of the benefits of starting a business
include protection of your personal assets, ease of raising
capital, gain anonymity, available tax benefits and more!
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