9Insurance Business ReviewJUNE 2024THE BASICS OF A BUSINESS PURCHASE AGREEMENTfixtures, inventory, accounts recoverable and lists of customers and goodwill. Potential assets excluded could be cash, company vehicles, real estate and more. This section of the business purchase agreement will also have the transfer of property, with the seller's "Agreement to Sell" and the buyer's "Agreement to Buy."CovenantsThis section of the business purchase agreement outlines the provisions that the seller is responsible for covering before and after the closing, such as tax liabilities, loan obligations, third-party fees, transferring employee benefit plans and employee salaries. This is also where buyer and seller agreements can be listed, including protective clauses like non-compete, confidentiality, intellectual property, non-solicit and indemnification agreements.TransitionAfter the transaction closes, both buyer and seller need a solid understanding of who's responsible for what including the seller's role in the business after the sale (if any), who's on the hook for training the new agents or advisors, and who will be notifying customers that the sale has transpired.Participation or Absence of BrokersIf third-party brokers were used in the transaction, this section of the business purchase agreement covers the legal names and contact info of those facilitators, as well as the party responsible for paying the broker.ClosingThis section of the business purchase agreement is usually straightforward, as it covers the logistics, date and time of closing. It also issues title transfers and outlines what money will be paid upon closing.AppendicesAny number of additional documents can be attached to this section of the business purchase agreement including letter of intent, financial statements, valuations, buyer/seller resumes, marketing plans and vendor agreements.While this summary of the fundamental sections of a purchase agreement covers the basics, it is not the complete list of the process. Both buyers and sellers of investment advisory firms and insurance agencies should be aware of the full scope and the importance of having a solid team in place throughout the transaction cannot be overstated. An attorney, plus an accountant and a broker (if applicable) will be key players in not only understanding the purchase agreement but making any necessary negotiations.Live Oak Bank provides financing for insurance agencies and investment advisory firms and produces new business articles monthly learn more at liveoakbank.com. Both sellers and buyers must follow a certain legal process during the sale of an investment advisory firm or insurance agency. After signing a letter of intent and completing due diligence, the business purchase agreement marks the official start to the legally binding transaction of a business
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