Selling your Business: Asset Purchase Agreements and Seller Representations

By - May 7, 2024 - Uncategorized

When selling your business, there’s lots to consider, including which assets you’ll put up for sale, how much they’ll cost, and how you’ll present your company to potential buyers. Two important components of the selling process are asset purchase agreements and seller representations. In this blog post, we’ll dive into asset purchase agreements and representations, as well as discuss best practices when putting your business up for sale.

What’s Involved in Selling Your Business?

Selling a business is no small feat. As the seller, you’ll need to assess the value of your business, prepare necessary documents for the purchase, market to potential customers, and much more. If you choose to sell the company through an asset sale (a sale in which a buyer purchases some or all of the company’s assets), you’ll also need to determine which assets the buyer can purchase, at what price, and negotiate terms of the sale with the buyer. An asset purchase agreement and seller representations will help define those terms as well as protect each party’s interests.

Understanding Asset Purchase Agreements (APAs)

An asset purchase agreement (APA) is a legal document that serves as a framework for how business assets will be transferred from the seller to the buyer. The agreement includes important information like the terms and conditions of the sale, which specific assets are available to purchase, the price of those assets, payment terms, and more. The purchase agreement also states the rights and obligations of each party.

Key Components of an APA

The key components of an agreement help the sale and purchase go smoothly. Such agreement components often include:

Assets: The purchase agreement specifies which assets the buyer will purchase. These can be tangible items like business inventory or office equipment, or intangible items like customer lists and rights to intellectual property.

Purchase price and payment terms: The agreement includes the price for the assets as well as states how the buyer can pay, such as in installments or through lump-sum payments.

Allocation of liabilities: In an asset purchase, the buyer doesn’t necessarily take on the liabilities of the business. The asset purchase agreement can address potential liabilities and which party is responsible for them.

Conditions: The asset purchase agreement may include various conditions that must be met. Conditions precedent must take place before the sale and purchase, such as securing financing. Conditions subsequent must take place after the sale and purchase, such as the delivery of specific documents.

Representations: The seller representations are statements that includes information about the business being sold, such as financial statements, assets, intellectual property, and more.

Benefits of Selling a Business Via an Asset Sale

Selling specific assets belonging to your business, rather than selling the business entity as a whole, offers a variety of benefits to you as the seller. These benefits include:

Flexibility in structuring the deal: With a purchase agreement, you can structure the deal to suit your needs and goals. While stock transactions and other types of business sales involve selling the entire company, an asset purchase allows you to pick and choose which specific assets a buyer can purchase.

Strategic business restructuring: Asset sales give you – the seller – the ability to restructure your business operations and put energy toward the areas you want to focus on moving forward. By selling non-essential or underutilized assets, you can streamline business operations and put resources towards the activities that will help the business grow.

Preservation of business reputation: Through asset sales, business owners can transfer unwanted assets while remaining in control of other aspects of the business, including the business name, relationships with customers, and more. This helps ensure a smooth transition for your employees, customers, and vendors while helping to protect the reputation of your business.

Compliance with Regulatory Requirements

When creating an asset sale agreement, make sure the agreement complies with any applicable regulations, laws, and industry standards. This helps ensure the agreement is enforceable and can withstand legal challenges, should they arise. An experienced business attorney can work with you to create contracts that include all the necessary business information.

What are Seller Representations?

A seller representation is a statement the seller makes about various aspects of the business being sold. Representations are an important part of asset purchase agreements, providing information about the condition, status, and legality of the assets being transferred. Through these representations, the seller aims to make the buyer feel confident in their purchase. Representations often include components like:

Financial statements accuracy: Sellers may include income statements, cash flow statements, and balance sheets to show that their financial statements are complete and accurate.

Title and ownership of assets: Sellers may include documents that show they have the titles to and/or ownership of the assets they’re selling, and that there aren’t any third-party claims impacting the assets.

Compliance with laws and regulations: Representations can show proof that the seller has been following all applicable laws, regulations, and industry standards while operating their business.

Absence of litigation or claims: As a seller, you may choose to show that there aren’t any threatened or pending investigations, claims, litigation, or disputes that could significantly affect the assets.

Intellectual property rights: Sellers may represent the ownership, validity, and enforceability of intellectual property rights, including trademarks, trade secrets, patents, and copyrights.

Drafting an Effective Seller Representation

An effective seller representation is complete, accurate, and addresses potential risks and liabilities a buyer may assume if they purchase your business. Take time to consider the different aspects of your business and what a potential buyer would want or need to know. Anticipating their questions and concerns can help you write a seller representation that shows your commitment to helping the buyer make an informed purchase. You’re also protecting your own interests by accurately representing the business, which can help prevent legal troubles down the road.

Scope and Limitations

Boundaries and rules impact what sellers must say about their business in the seller’s representations. While it’s important for sellers to be truthful about their business, there are also limitations regarding what sellers promise. For example, when a seller says that the information they have provided is accurate to the best of their knowledge, they’re only promising what they know, and not what they don’t.

Some common limitations include:

Materiality qualifiers: Materiality qualifiers state that only breaches that have a material adverse effect on the business are actionable.

Knowledge qualifiers: Sellers are only responsible for sharing information about things they know.

Time limitations: Sellers are only responsible for the accuracy of the information they provide as of a specific date or period of time.

Disclosure schedules: Along with representations, sellers may provide disclosure schedules that identify exceptions to the representations. This can limit the seller’s liability for issues or risks that they’re aware of.


While representations share factual details about a company’s past and present conditions, warranties offer assurances. Warranties may include promises such as assets being sold are in good working condition, there is no pending litigation affecting the assets, and no third parties have been authorized to use the assets that are being sold.

Importance of Due Diligence

Buyers will perform due diligence before deciding to purchase your business. During that time, they’ll attempt to verify that the representations about the business are accurate, assess the value of the assets, and identify potential risks and liabilities. This gives you, the seller, an opportunity to address the buyer’s concerns and highlight the strength of your business.

Risks of False or Misleading Information

When disclosing information related to the asset purchase, it’s your responsibility as the seller to provide accurate information. This includes the information in asset purchase agreements, representations, and disclosure schedules. False or misleading representations can lead to financial liabilities, legal disputes, and damage to your reputation.


Before the asset purchase is finalized, the seller and buyer can negotiate the seller representation. First, each party will identify negotiable and non-negotiable representations. When they’ve agreed on areas that are open for discussion, the seller and buyer can negotiate the representations in an attempt to protect their own interests. Being transparent and respectful can help the negotiations go smoothly and foster trust between each party.

Best Practices for Sellers in Asset Purchase Transactions

Following best practices can help you feel confident during an asset purchase transaction and help you maximize the value of the purchase. One best practice is to work with an experienced business attorney. The attorney can help create an asset purchase agreement and representation, guide you through the sale and purchase process, and provide advice based on their experience and knowledge. You should also conduct thorough due diligence so you can provide accurate information to the buyer via the agreement as well as identify and address any issues. When negotiating the agreement for the purchase, work to set terms that protect your interests yet are fair to the buyer.

About Stevens Law Firm

Want help with asset sales, asset purchase agreements, and representations? The team at Stevens Law Firm is here for you. We have years of experience helping companies large and small through all stages of business, including asset sales. Whether you need assistance with due diligence, negotiating the purchase agreement, drafting contracts, or any other area of the sale and purchase, you can count on Stevens Law Firm to provide caring and valuable guidance and support.

Contact Us

Give us a call at (614) 826-3100 or fill out our online contact form to learn more.

latest thinking at stevens law firm

See All News >>