Key Elements of Business Sale Documents

Business Sale Documents

In this article, we will try to tell you in detail how to sell a business on your own, as well as provide you with the key elements of the business sale documents.

How to Properly Buy and Sell a Business?

Business activities can be carried out by different entities, including non-commercial ones. The transfer of ownership is available to everyone, but with a number of nuances. For legal entities, there is the possibility of completely transferring the enterprise; in turn, non-profit organizations are required to leave one of the founders. When registering a sale and purchase between individual entrepreneurs, difficulties arise since this is not a legal entity but the status of a specific person.

If you want to sell a business, you need to understand what exactly you are selling. Sometimes people want to disguise the sale of certain property under the sale of a business in order to optimize taxation or seek other benefits. For these purposes, this article is hardly suitable. If you are still selling a business in the generally accepted sense as a certain streamlined process during which the business owner makes a profit, then this article will help you formalize the sale of the business and, at the same time, secure your risks as much as possible.

A business sale and purchase agreement is a document that establishes the conditions for the transfer of a property complex, intellectual and corporate rights. A business sale agreement can be called differently but have the same purpose. The participants in the transaction include tangible and intangible assets, which form a property complex, into the concept of business. In modern legal relations, such a transaction is carried out through the acquisition of intellectual rights, a property complex, or corporate rights.

As part of due diligence for business sales, the following are checked:

  1. documents confirming that the company has rights to business assets according to the list of business assets;
  2. accounting, banking documents, and tax reporting;
  3. corporate documents (charter, minutes of the general meeting of participants, orders, instructions, etc.);
  4. information on accounts payable and receivable, and lists of creditors and debtors.

Which Are the Key Elements of the Business Sale Documents?

In the process of doing business, the business owner may be faced with the question of selling it for one reason or another. It should be understood that when alienating a business, the object of the transaction is understood to be the entire process of the company carrying out entrepreneurial activities with the aim of making a profit and not any separate item of the company’s property. The whole complex of equipment, products, and well-established business processes are transferred during the sale.

Among the key elements of the business sale documents are:

  • Warranties and Guarantees.
  • The Description of Goods.
  • Delivery Instructions.
  • Inspection Period.
  • Payment Details.
  • Service Level Agreement.
  • Pricing.
  • User’s Rights to Access.

What can be attractive in buying a ready-made business: the state registration procedure has been completed, there are current accounts, the company has a certain history and name, the presence of certain staff, a formed customer base, and business tactics. The purchase of the legal entity itself will not entail a change in the structure of existing relations with contractors and government bodies: it will not be necessary to re-sign contracts, re-register licenses, patents, or means of individualizing the legal entity.

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