A business purchase agreement, also called a business transfer agreement, is a written contract between the seller and the buyer of a business. It lists what is being sold, the price, how the buyer will pay, and when the sale closes. This page explains how the document works and gives you a free business purchase agreement template to read, download or fill out online.
Last Updated: October 2026. This guide is reviewed and updated regularly to reflect current law. If you notice an error or outdated information, please contact us.
A business purchase agreement is a contract that records the deal when one person or company buys a business from another. It spells out who is involved and what changes hands. A typical agreement covers these points:
A business purchase agreement is quite a lengthy document in most cases. Unlike most other sale or purchase agreements, it has to go over dozens, often hundreds of business access and possible liabilities. It will also typically contain several other agreements like the non-solicitation or non-disclosure agreement. With dozens upon dozens of pages of text full of language only a lawyer could understand, it’s no wonder why many business owners prefer to delegate dealing with this agreement to their legal team.
Now, even if you have a rather small business, it’s worth hiring an attorney or law firm to provide legal advice. You could potentially be putting yourself in harm’s way should the business deal go to court to save a few hundred dollars. That said, you should probably read the agreement a couple of times over.
The first thing to understand is that a business purchase agreement does not transfer the ownership of a business from the seller to the buyer. It describes the agreement of both parties on how they intend to go about the process of purchasing a business. It covers how the transfer of ownership is going to take place. The legal document that actually transfers the ownership is the bill of sale and handing that bill to the buyer should typically be included in a business purchase agreement.
A business purchase agreement is a legally binding contract that formalizes the terms of transfer of ownership of a business from the seller to the purchaser. You need to sign one when you’re selling a business, not matter how small. It’s not legally required, but you definitely want to have one in place to make sure both parties keep to their word and complete the transaction as agreed upon.
A purchase agreement is not only for the sale of a whole business. You may also want one in these cases:
For both the seller and buyer, this agreement serves as a final step in negotiations and as a guarantee that the sale is going to close successfully. If it doesn’t and either the buyer refuses to go through with the purchase or the seller refuses to transfer the ownership of a business, the case could go to court as this contract is legally binding.
While bulky and full of legal jargon, a business purchase agreement is a necessary part of transferring ownership of a business. It has three key benefits that make it integral to the process.
The worst thing that can happen to you as a business owner selling a business is coming to a meeting to close the sale only to learn that the buyer expected more than you intended to sell. They agreed to pay a set price for everything the business has, but you were meaning to save a couple of assets or shares. Or you were expecting a lump sum payment and the buyer wanted to pay in parts. That could end up rather ugly as verbal agreements often tend to do.
With a business purchase agreement, you have zero risks of ending up in a similar situation. All the assets of the business accounts receivable and date of closing are written in the contract and agreed upon by both parties months before the deal takes place.
There are cases where the purchase of a business may take months before closing. Whether the business owner wants to finish a contract before transferring ownership, giving employees ample time to find new job opportunities before terminating contracts, or the buyer wants to do their due diligence, the process can be long and arduous.
A well-written and meticulous business purchase agreement explains each step of the sales process in as much detail as possible. It can describe the operations of the business in the period before the sale, the condition precedent for the sale to close, and other provisions that the negotiators agreed upon.
This not only makes it way easier for the business owners to handle the matter but allows for outsourcing the process to the legal team or an escrow.
Lastly, no matter how much trust there is in a business relationship, there should always be a contract signed between the parties. A legally-binding business purchase agreement makes sure that both the buyer and seller stick to their representations and warranties. Doing otherwise could potentially mean the hurt party will take the case to court, and most likely win.
For instance, if after reading the agreement the court rules the business in question a marketable title, it may either enforce the purchase of the title by the buyer who signed the contract or impose penalties.
A novice entrepreneur may think that the hardest thing when it comes to the purchase and sale of a business is acquiring financing for the operation. However, it may be about the easiest part of the whole process. The main issue is not applying for a loan and receiving a bill of sale on your hands. It’s finding out whether it’s worth buying a particular business.
Let’s be honest, there aren’t a lot of businesses for sale, and finding one, especially in a smaller city, may prove tough. To find suitable candidates, try these:
Once that is done, it’s time to see whether this business is any good.
A business with a good-looking logo and great interior design isn’t worth a penny if it’s not turning in a profit. To assess the value of a business, you may look at these factors:
Obtaining this information would probably require you to contact the business owner, so make sure to start your relationship on a positive note.
If after looking into the business’s paperwork you decide buying it will be a net positive for your wealth, it’s time to start the first round of negotiations. The main points for your first formal negotiations should be the purchase price, security deposits, and the list of assets included in the sale. At this point, you may want to hire an attorney or a law firm to help sort out the legal matters.
With that done, you may continue with the next formal step, sending the letter of intent. This letter, LOI for short, is a non-binding document that doesn’t require you to go through with the purchase, but merely outlines your intentions.
What is binding in the LOI is the non-disclosure clause, that is if you include one. It is after submitting this letter that you may be given closer access to the company’s internal documents. Use this opportunity to research financial statements, tax obligations, and other liabilities the company may have undisclosed.
After your due diligence is done and the seller did theirs too, the decision has to be made. If you are to go through with the purchase, you’ll have to create and sign a business purchase agreement. You will find detailed instructions on that below. Feel free to consult with the free purchase of business agreement template provided on this page.
With a purchase agreement signed, there’s nothing left to do then go through each point of the process. Follow your agreement together with the seller of the business, provide the payment in either lump sum or in parts, and receive a bill of sale that transfers the ownership of the business from seller to buyer.
Even though each purchase agreement would be vastly different depending on the type of business and type of sale at hand, there are some crucial components of this document that are absolutely required. Here is what you may expect to see in a typical purchase agreement.
At the very top of any business purchase agreement, you can expect to find the personal information of both buyer and seller. That includes their full names and residential addresses.
The next piece of information you will see on all documents like this is the description of the business being sold. This includes its full legal name and the description of all assets that are a part of the transaction. But that’s only one side of the coin, there are also liabilities that a business may have.
Any loans the business may have will going to be transferred to a new owner along with the business itself.
In a purchase agreement, the seller and purchaser will make a series of statements about their intentions — representations and warranties. The clause containing these will also typically include provisions for when warranties are breached by either party.
Pricing and a breakdown of how the full price is to be paid are next on the list. This section of the document will go on in detail on how the funds and ownership of business assets are going to be exchanged. Accounts receivable disambiguation also should appear in this section.
One of the most crucial parts of the purchase of business agreement is the closing conditions and the closing date. Should the conditions of the closing not be met, the deal is called off and the purchaser does not hold legal responsibility to continue with the deal.
If the conditions are met, however, they’re legally bound to do so. The bill of sale is given to them on the closing date after payments agreed upon are made and the transaction is considered complete.
Lastly, many purchase agreements contain non-competition and non-solicitation clauses. In essence, these mean that the seller of the business would not run another business that competes with the one they just sold. Nor would they try to solicit their patrons to transfer from the sold business to a new one.
These steps follow the FormsPal Business Purchase and Sale Agreement template on this page, in the order of the form. Going into a deal with a simple template form is not advisable as it’s better to customize your template and make it suit your business. You also should receive legal advice before creating a legally-binding purchase agreement. Here is how to fill out your business purchase agreement template once you have customized it.
The screenshots under each step show the FormsPal Business Purchase and Sale Agreement template filled with sample entries in blue, so you can see where each answer goes. The names, addresses, dates and amounts are examples only.
Agreement date, Buyer and Seller. Enter the date of the agreement. Then enter the Buyer's name and address. Next enter the Seller's name, the type of entity the Seller is, and the Seller's address. Use an address where each person can receive mail.
Name of the Business. In the first recital, write the name the Seller's business is known by. Use the full legal name of the business, not just the trademark.
Purchase price and closing date. Write the purchase price in Section 1 and the closing date in Section 2. Choose a business day to avoid confusion. If the Buyer pays the full price by wire on the closing date, tick the first payment box.
Cash plus promissory note option. If the payment is split, tick the second box instead. Enter the cash amount and the amount of the promissory note in the two blanks. Tick only one of the two payment boxes.
Business trade name. In Section 5, write the name the Seller grants to the Buyer.
Accounts payable exceptions. Section 7 covers accounts payable. Normally, the business seller takes it upon themselves to pay all accounts payable before the closing of the deal, but if there are any exceptions, they should be noted in this section. List each exception on the lines under Exceptions, or leave the lines blank if there are none.
Covenant not to compete. If the Seller agrees not to compete, tick the first box in Section 9 and enter the number of months after closing.
No non-compete option. If there is no non-compete, tick the second box in Section 9 instead and leave the months blank.
Post-closing consulting. To have the Seller help after closing, tick the first box in Section 14. Enter the Seller's principal and the number of days.
No consulting option and governing law. If there is no consulting, tick the second box in Section 14 instead. In Section 15 (Governing Law), write the state the parties choose.
Seller signature block. On page 5, the Seller signs and prints a name and title under Seller.
Buyer signature block. The Buyer signs and prints a name and title under Buyer. Re-read the filled form for mistakes before signing.
Filling in the business purchase agreement template is only part of the job. These steps cover the exhibits, the final read-through, the signatures and the copies, so the agreement is complete when you hand it over.
Describe the assets in the exhibits. Prepare this part before you fill in the template, because the first page refers to Exhibit A and Exhibit B. In the exhibits attached to the document, describe the business assets that are going to be transferred to the new owner and the ones that aren’t a part of the transaction. Give details, such as addresses of properties and registration numbers of businesses and intellectual property. Make sure that this part of the agreement is correct before attending the signing.
Read the whole document. Re-read the filled-in agreement for typos and mistakes.
Sign the document. Both the Buyer and the Seller sign it. The document is legally binding when signed and the only thing you have left to do now is go through with the provisions outlined in it.
Keep your copies. Keep a signed copy of the agreement and its exhibits for each party.
A business purchase agreement sets out the terms of the sale and how it will take place. The bill of sale is a separate document that the buyer receives at closing. Keep both documents together in one file, along with the exhibits.
Have these details ready before you start:
With these at hand, you can finish the business purchase agreement template in one sitting.
Yes. Use the Create My Document button at the top of this page to answer a few questions and build your business purchase agreement template online. You can also download the PDF or Word file and fill in the PDF with the FormsPal PDF editor.
The template has two payment boxes. In the first, the Buyer pays the full purchase price by wire transfer on the closing date. In the second, the Buyer pays part in cash and part with a promissory note. Tick only one of the two.
They are the two attachments named on the first page of the template. Exhibit A describes the assets that come with the business. Exhibit B describes the assets the Seller keeps.
Yes. It is a good idea for the Buyer and the Seller each to keep a signed copy, together with the exhibits.
General information, not legal or tax advice.
