Insurance Business ReviewJUNE 20248IN MY OPINIONTHE BASICS OF A BUSINESS PURCHASE AGREEMENTBy Mike Strakhov, Senior Vice President, Head of Insurance / Accounting & Tax / Law Firm Lending, Live Oak BankDuring the sale of an investment advisory firm or insurance agency, both the seller and buyer must follow a certain legal process. After signing a letter of intent and completing due diligence, a business purchase agreement marks the official start to the legally binding transaction of a business. This agreement requires the buyer to purchase the business according to the terms and price outlined in the agreement. These documents can be lengthy and full of legalese, which is why an experienced attorney should create the purchase agreement.Purchase agreements are complex but typically have several standard sections. The biggest takeaway on purchase agreements is this: while it's ideal to let an attorney handle the terms and conditions it's not a bad idea to have a general understanding of each section, as we've outlined below. Both parties should understand what they're signing, so leverage the professional team of your firm or agency to help you translate some of the legal jargon and technical language.PartiesThis section appears at the beginning of the purchase agreement and lists the legal names of the seller and buyer, as well as their contact information.Description of BusinessAll aspects of the business are outlined here, including the location and purpose of the business, the services and products of the business, the business entity, management systems and structure, financial summary and overview of target customers. This section also includes a statement verifying the seller's legal right to authorize the sale as well as additional legal representations and warranties.SaleIt's critical to define the type of sale, along with assets included and excluded from the sale in this section. Potential assets included could be equipment/machinery, Mike Strakhov
< Page 7 | Page 9 >