How to Draft a Contract for the Purchase & Sale of a Business
- 1). Briefly state the terms of the purchase and sale agreement, including the date that the business will change hands, the sale price, the date the buyer will pay the earnest money, and the schedule for paying the remainder of the principal, along with the agreed upon interest rate. State the full names and addresses of both the buyer and seller, as well as the address of the business and its primary type of operations. Broadly state the types of assets that the business sale includes, such as the accounts, customer database, systems and operations manuals, and equipment and leasehold improvements at a physical business location. Detail terms for the sale of business inventory, such as whether it will be sold at actual cost or a discounted rate, and whether there are limits on what types of inventory the buyer is willing to purchase.
- 2). Prepare a detailed list of the equipment that will change hands with the sale of the business. Include all major fixtures and appliances, including measurements and brand names. If the equipment is permanently installed, include a description of where it is situated in the facility. If any items are not fully owned by the seller, provide details of how much equity the seller has in the equipment, the balance remaining to be paid, and the agreed-upon terms as to who will pay the balance.
- 3). Prepare a non-compete agreement articulating the buyer's and seller's arrangement as to the restrictions placed on the seller regarding his legal right to own and operate a business that could compete with the one he is selling. Specify a period during which he cannot start or operate a competing business, and state the precise nature of the activities he must avoid. If the business changing hands operates in a specific geographical area, provide details of where the seller may not operate a similar business, such as cities or counties, or listing ZIP codes.
- 4). Provide the names of other parties involved in the purchase and sale of the business. Include the names of brokers and agents working for the buyer and seller, as well as the name of the escrow company that will handle the exchange of funds.
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