Asset Purchase Agreement Template

In plain language: Identifies the buyer and seller as legal entities, states the purpose of the agreement, and defines key capitalized terms used throughout the document.

Common mistake: Using trade names instead of registered legal entity names. If the seller's legal entity differs from the operating brand, asset title may not transfer cleanly and third-party consent requirements can be missed.

In plain language: An exhaustive list of every asset being transferred — tangible (equipment, inventory, furniture) and intangible (IP, customer lists, contracts, domain names) — attached as a schedule to the agreement.

Common mistake: Drafting the asset schedule as a category description rather than a specific enumerated list. Vague schedules lead to post-closing disputes over whether a particular asset was included or excluded.

In plain language: Expressly lists what the seller is keeping after closing — cash, certain receivables, insurance policies, tax refunds, corporate records, and any assets not on the purchased-assets schedule.

Common mistake: Omitting a specific excluded-assets schedule and relying only on the purchased-assets list by implication. Courts in several jurisdictions require explicit exclusion language to defeat successor liability claims.

In plain language: States the total consideration, how it is paid (cash, note, equity, or earn-out), the allocation among asset classes for tax purposes, and any escrow holdback.

Common mistake: Omitting a purchase price allocation schedule (required under IRC §1060 in the US). Without it, the IRS assigns allocations that typically favor the government — often resulting in higher ordinary income tax for the seller.

In plain language: Identifies the specific liabilities the buyer agrees to take on, and explicitly states that all other seller liabilities remain with the seller — the primary liability benefit of an asset deal.

Common mistake: Using a broad catch-all to assume 'all liabilities related to the purchased assets.' This approach can unintentionally sweep in unknown pre-closing environmental, employment, or tax liabilities — eliminating the core advantage of structuring the deal as an asset purchase.

In plain language: Statements of fact made by each party — seller warrants good title, no undisclosed liabilities, no pending litigation, and accuracy of financial information; buyer warrants authority to purchase and financing capacity.

Common mistake: Accepting seller reps that are qualified by 'to Seller's knowledge' without defining what constitutes knowledge. An undefined knowledge qualifier can make reps effectively unenforceable against a seller who claims ignorance.

In plain language: Sets out what must happen — or be confirmed as true — before either party is legally required to proceed with the closing, such as regulatory approvals, third-party consents, and absence of a material adverse change.

Common mistake: Failing to list required third-party consents — such as landlord consents, key customer contract assignments, or regulatory licenses — as closing conditions. Missing a required consent can make specific purchased assets untransferable at closing.

In plain language: Defines each party's obligation to compensate the other for post-closing losses from breaches of reps, excluded liabilities, or third-party claims — including survival periods, caps, and deductibles.

Common mistake: Setting the indemnification cap at a fraction of the purchase price without tying it to a survival period. A short survival period (e.g., 12 months) combined with a low cap can effectively make reps and warranties meaningless for latent defects that surface later.

In plain language: Restricts the seller from competing with the acquired business or soliciting its customers and employees for a defined period and geography after closing.

Common mistake: Using a non-compete drafted for an employment context rather than a business sale. Post-sale non-competes in M&A transactions are generally held to a higher standard of reasonableness and are more consistently enforced than employee non-competes — but must still be scoped to the actual business sold.

In plain language: Specifies which jurisdiction's law governs the agreement and whether disputes go to arbitration, mediation, or litigation — and where.

Common mistake: Choosing a governing law state with no connection to where the assets are located or either party operates. Some states have mandatory rules — particularly for real property, employment, and environmental liabilities — that apply regardless of contractual choice-of-law provisions.

An asset purchase agreement is a binding contract in which a buyer acquires specific assets of a business from a seller rather than purchasing the seller's legal entity itself. It specifies exactly which assets transfer, which liabilities — if any — the buyer assumes, the purchase price and payment mechanics, and the representations and warranties each party makes about the transaction. The document governs the entire acquisition from signing through closing and post-closing obligations.

In an asset purchase, the buyer acquires named assets and assumes only specified liabilities — the seller's legal entity remains intact. In a stock purchase, the buyer acquires the seller's equity, inheriting the entire legal entity including all of its liabilities, contracts, permits, and obligations. Asset deals are generally preferred by buyers because they allow selective liability assumption and a stepped-up tax basis in acquired assets. Sellers often prefer stock deals for capital gains tax treatment and cleaner exit.

Any business asset can be included: tangible property such as equipment, inventory, vehicles, and furniture; intangible property such as patents, trademarks, copyrights, trade secrets, domain names, and software; and contractual rights including customer contracts, supplier agreements, and real property leases. The agreement should explicitly schedule every asset being transferred. Assets not listed on the schedule are typically treated as excluded, so completeness matters.

Only the liabilities specifically listed as 'assumed liabilities' in the agreement transfer to the buyer. All other obligations remain with the seller. This is the primary reason buyers prefer asset deals — they can acquire operations without inheriting unknown or contingent liabilities such as pre-closing litigation, environmental cleanup obligations, or unpaid taxes. However, successor liability doctrines in some jurisdictions can impose certain seller obligations on the buyer regardless of contract language, particularly for product liability and tax claims.

A purchase price allocation assigns the total consideration to specific asset classes — cash, inventory, fixed assets, IP, goodwill, and non-competes. In the US, IRC §1060 requires both buyer and seller to use the same allocation and report it on IRS Form 8594. The allocation directly affects how much of the gain is taxed as ordinary income versus capital gains for the seller, and determines the buyer's depreciation and amortization schedule. Failing to agree on the allocation in the contract often leads to inconsistent tax filings and IRS scrutiny.

At minimum, a seller should warrant: good and marketable title to all purchased assets free of liens; authority to enter the agreement without third-party consent (or disclosure of all required consents); accuracy of financial statements provided to the buyer; no pending or threatened material litigation; compliance with applicable laws; and no material adverse change in the business since the last reporting date. Each rep should be accompanied by a disclosure schedule listing known exceptions to avoid a post-closing breach claim.

For straightforward asset acquisitions — such as purchasing equipment or a small business with a simple asset set — a high-quality template reviewed by a lawyer is typically sufficient. Engage experienced M&A counsel for transactions involving significant IP, real property, regulated assets, earn-outs, or complex liability structures. Legal fees for a reviewed template engagement typically run $1,000–$3,000; a fully negotiated custom agreement for a mid-market deal runs $5,000–$25,000 or more.

Successor liability is the legal doctrine under which a buyer of assets can be held responsible for the seller's pre-closing obligations — even when the agreement expressly excludes those liabilities. It typically arises in product liability, environmental, tax, and bulk sales contexts. An asset purchase agreement limits exposure through explicit excluded liabilities language, bulk sales compliance, environmental representations, and indemnification provisions — but buyers in higher-risk industries should conduct thorough due diligence and consider environmental and tax indemnities from the seller.

At closing, the seller delivers executed asset transfer instruments — bills of sale, IP assignment agreements, lease assignments, and contract assignments — and the buyer delivers the closing payment. Both parties confirm that all closing conditions have been satisfied or waived, execute any ancillary agreements such as transition services or non-compete agreements, and the agreed escrow amount is funded. Physical or electronic transfer of assets and access credentials typically occurs simultaneously with payment.

Yes. An earn-out ties a portion of the purchase price to the future performance of the acquired business — typically revenue or EBITDA targets over 1–3 years post-closing. Earn-outs bridge valuation gaps when the buyer and seller disagree on the business's growth trajectory. They must be carefully drafted to define the metric, measurement period, calculation methodology, buyer's operating obligations during the earn-out period, and dispute resolution process — earn-out disputes are among the most heavily litigated provisions in M&A agreements.