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Ray
Ray, Lawyer
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Experience:  30 years in civil, probate, real estate, elder law
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Need an agreement to sell a small business in California. I

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need an agreement to sell a small business in California. I already have a buyer who is someone that used to work for me. Could you recommend a legal form and then be available to answer questions?Thanks,
Joe Tallman

Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question and respond.

purchase agreement is the primary legal document used for the acquisition of a business. The purchase agreement outlines all of the details of the sale and mirrors the letter of intent. Depending on how you structure this transaction you may also need a bill of sale, promissory note, security agreement, stock transfer certificate, and company resolutions. The purchase agreement should include all of the following:

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  • clear statement of who is buying the business and who is selling it
  • whether this is a sale of business assets or an entity sale
  • the purchase price and method of payment
  • actions that the buyer and seller must take prior to closing
  • the closing date
  • representations and warranties of the buyer
  • representations and warranties of the seller
  • future covenants against competition and confidentiality
  • default provisions for sales involving seller financing
  • boilerplate legal provisions
  • exhibits of other relevant documents, such as bill of sale and promissory note.

The forms above meet these criteria.

A second form without financing

BUSINESS SALE AGREEMENT

Agreement made this _________day of _________, 20__ by and between ____________________ and _____________________ (doing business as _____________________) of ________________________ ____________________ (hereinafter referred to as "Seller") and _________________________________ (hereinafter referred to as the "Buyer").

Whereas the Seller desires to sell and the Buyer desires to buy the business of a certain _______________________ now being operated at ____________________________ and known as ______________________ and all assets thereof as contained in Schedule "A" attached hereto, the parties hereto agree and covenant as follows:

1. The total purchase price for all fixtures, furnishings and equipment is $___________ Dollars payable as follows: (a) $____________ paid in cash; certified or bank checks, as a deposit upon execution of this Agreement, to be held by ________________________. (b) $___________ additional to be paid in cash, certified or bank checks, at the time of passing papers. (c) $_________ to be paid by a note of the Buyer to the Seller, bearing interest at the rate of _____ percent per annum with an option of the Buyer to prepay the entire outstanding obligation without penalty. Said note shall be secured by a chattel mortgage and financing statement covering the property to be sold hereunder, together with any and all other property acquired during the term of said note and placed in or within the premises known as __________________________ ____________________.

2. The property to be sold hereunder shall be conveyed by a standard form Bill of Sale, duly executed by the Seller.

3. The Seller promises and agrees to convey good, clear, and marketable title to all the property to be sold hereunder, the same to be free and clear of all liens and encumbrances. Full possession of said property will be delivered in the same condition that it is now, reasonable wear and tear expected.

4. Consummation of the sale, with payment by the Buyer of the balance of the down payment and the delivery by the Seller of a Bill of Sale, will take place on or before ______________, 20__.

5. The Seller may use the purchase money, or any portion thereof, to clear any encumbrances on the property transferred and in the event that documents reflecting discharge of said encumbrances are not available at the time of sale, the money needed to effectuate such discharges shall be held by the attorneys of the Buyer and Seller in escrow pending the discharges.

6. Until the delivery of the Bill of Sale, the Seller shall maintain insurance on said property in the amount that is presently insured.

7. Operating expenses of _____________________ including but not limited to rent, taxes, payroll and water shall be apportioned as of the date of the passing of papers and the net amount thereof shall be added to or deducted from, as the case may be, the proceeds due from the Buyer at the time of delivery of the Bill of Sale.

8. If the Buyer fails to fulfill his obligations herein, all deposits made hereunder by the Buyer shall be retained by the Seller as liquidated damages.

9. The Seller promises and agrees not to engage in the same type of business as the one being sold for_______ years from the time of passing, within a __________ radius of ___________________________.

10. A Broker's fee for professional services in the amount of _________________($________) Dollars is due from the Seller to_________, provided and on the conditions that papers pass.

11. The Seller agrees that this Agreement is contingent upon the following conditions: (a) Buyer obtaining a Lease on the said premises or that the existing Lease be assigned in writing to the Buyer. (b) Buyer obtaining the approval from the proper authorities (Town and State) of the transfer of all necessary licenses to the Buyer. (c) The premises shall be in the same condition, reasonable wear and tear expected, on the date of passing as they are currently in.

12. All of the terms, representations and warranties shall survive the closing. This Agreement shall bind and inure to the benefit of the Seller and Buyer and their respective heirs, executors, administrators, successors and assigns.

13. If this Agreement shall contain any term or provision which shall be invalid or against public policy or if the application of same is invalid or against public policy, then, the remainder of this Agreement shall not be affected thereby and shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed in triplicate on the day and year first above written.

SELLER:

________________________________________________________

BUYER:

________________________________________________________

BROKER:

________________________________________________________

I appreciate the chance to help you tonight.Please let me know if you have more followup.

If you have your own form here if you will post it be happy to comment.

Customer: replied 4 months ago.
Hi Ray,Thanks for your response. The form you provided is similar to another one I found on the internet. Just for clarification please help with the following:
1. I am only selling the value of monthly set income from my customers, a website and name of my company that should help them get additional revenue. So, I presume in the sample agreement I would need to edit the respective section that pertains to equipment, fixtures, buildings etc.2. Will be selling this business in two payments, one this year and the second next year. Any advice on that...perhaps your form addresses it, but have not had time to review it in detail?3. Sorry, but my wife is calling me for dinner. Would it be okay if I looked at the agreement in detail and then come back in an hour or so to ask a couple more questions?Thanks,
Joe

Joe it will be if I miss you tonight will respond in the am if this is ok.Enjoy your dinner here.Annual payments have them due same time consecutive years.

I can do unlimited chat, I sent you an offer not yet set up for calls./If you accept I will answer any questions here you have online until we are done.

Customer: replied 4 months ago.
okay, thanks, ***** ***** back later or tomorrow morning sometime. Have one meeting at 9 to 11.

No problem have a good evening, talk to you soon.

Customer: replied 4 months ago.
Hi Ray,Sorry, could not get back to you yesterday. I should have some time this afternoon after 3 our time in California. Would that be okay?Thank you,
Joe Tallman

Hi Joe that would be fine.Accept the offer and post anything you want read and commented.You can ask anything you want.Thanks.

Customer: replied 4 months ago.
Hi Ray,
I am available now, but will not be available from 6 p.m. tonight. Let me know if you can discuss my questions now.
Thanks,
Joe

Joe I am here now.If you accept the additional services will start reading and comment here.Thanks

Customer: replied 4 months ago.
I did click on the $ 60 offer earlier today. Did it not go through?Does that change form 40 to 60 or is it an additioal 60?

No ti did not go through here it is again.

Customer: replied 4 months ago.
did not get your answer to 2nd question regarding the $60

You just need to fill in the blanks.If you are agreeing to a noncompete how many miles, how long here.I would suggest 20 miles and a year to 18 months but it is negotiable.Also you can add interest to the note on any unpaid balance if you choose in the event he defaults.Overall this form works fine just make sure you fill in everything even if you put nonapplicable.You never want any blanks in the agreement so either N/A or line through it or delete and renumber.Don't want the buyer here to sneak anything in.

Let me know if you have more follow up.Be happy to respond.

Customer: replied 4 months ago.
The question I refer to is: will the new offer cost $60 instead of 40 or will it be an additional $60?

It will be an additional $60 because of the time here.I will answer all questions you have and you can come back to it in a day or two if you think of something later.

Unlimited questions here.

Ray and 7 other Legal Specialists are ready to help you
Customer: replied 4 months ago.
Okay, agreed to the new offer.
Customer: replied 4 months ago.
I attempted to fill in the spaces and make a few edits to the agreement. Did you see the attachment?
Customer: replied 4 months ago.
Do you prefer to chat or talk on the phone?
Customer: replied 4 months ago.
Ray, it is almost 6 and I want to listen to the debate. I will write a few questions later and send them to you tonight. We can continue tomorrow afternoon if that is convenient for you. Okay?
Customer: replied 4 months ago.
do not see any response yet, so presume you are tied up. Will talk with you tomorrow. Thanks, Joe

Yes just get rid of the blanks.Item 8 say 20 miles and two years for the noncompete, less if you want say a year.Thats negotiable.

9a here California in the blank

9.1 an amount here for seller to back out if there is a fire say $40k

The rest here is fine.I wish you the best here with the sale.Let me know if you have more here.

Customer: replied 4 months ago.
1.I do not think the non compete clause means much in California and the buyers know that I just want to retire, so not any chance I want to do this again. I am 71 year old. Can I just delete it. Will put it back if they want it.2. California - got it.3. Fire - all my files are on the cloud which I will transfer to them. There is really nothing in my office at home or in our temp office that will have any negative affect on the business if it burned. Even if my computer blows up, doesn't matter. Have e-mail and files on the cloud. Do not see a need for this clause under the circumstances. What do you think?4. Once we sign the agreement, should I officially file it somewhere?5. Any need to use an escrow company to assure proper transfer of ownership? If so, would an online service suffice?6. Any need for a bill of sale? All assets are soft..no vehicles, equipment, furniture, fixtures, etc7. The party buying the accounts have a corporation they use in Los Angeles for a similar business to mine. What is the proper way to refer to them in the top section, individual names, corporation name or??8. Does the promissory note read okay? I deleted a few lines as we just talked about making a couple of payments, one for each tax year and a final one with adjustments for the earn out. Do I need to file the promissory note?9. I also agreed to be available periodically to talk to customers in an effort to gradually introduce them to the new owner. I guess I should write something about that as it was a commitment.10. The buyers are going to keep their own company and our company name separate as they both are already branded, but we would work together to add value to overall services to customers. We want to announce early on that we are "merging companies" to be able to improve on services. Thought that may help maintain accounts rather than risk some not wanting to deal with a new buyer from out of town. Then after the last payment is made by the buyer and customers are familiar with them, we could announce that I am retiring. What do you think about this strategy?. It is not quite the truth, but customers will still be contracted to GWS. The buyers also plan to keep using the contract people I have here in Bakersfield. My name is ***** ***** the name of the company. I do not even mention my name in the about us page of the website, but all my customers know me as the owner.Thanks Ray,
Talk to you tomorrow,
Joe
Customer: replied 4 months ago.
One more question: The promissory note has a provision for default by charging penalties. What if they just do not pay anything after the first payment? Do I have recourse to take back the company?. Do not see any wording to address this. I think that there should be something in writing to address this. What do you recommend?

1.I do not think the non compete clause means much in California and the buyers know that I just want to retire, so not any chance I want to do this again. I am 71 year old. Can I just delete it. Will put it back if they want it.Yes you can here.

3. Fire - all my files are on the cloud which I will transfer to them. There is really nothing in my office at home or in our temp office that will have any negative affect on the business if it burned. Even if my computer blows up, doesn't matter. Have e-mail and files on the cloud. Do not see a need for this clause under the circumstances. What do you think?

Again you can delete this here if not applicable.

4. Once we sign the agreement, should I officially file it somewhere? No both parties get a copy here.You can record this in deed records but the law does not require it.

5. Any need to use an escrow company to assure proper transfer of ownership? If so, would an online service suffice?

It would ensure that both parties are protected here.It is a good idea if there is a dispute.

6. Any need for a bill of sale? All assets are soft..no vehicles, equipment, furniture, fixtures, etc

Here if that is the case it would not be necessary since no equipment, etc.

7. The party buying the accounts have a corporation they use in Los Angeles for a similar business to mine. What is the proper way to refer to them in the top section, individual names, corporation name or??

It is better for you if they buy it personally and sing the note personally rather than the corporate name.They can transfer it later but you want them personally liable here.

8. Does the promissory note read okay? I deleted a few lines as we just talked about making a couple of payments, one for each tax year and a final one with adjustments for the earn out. Do I need to file the promissory note?

No you can just give both sides a copy.It is not legally necessary to file this document anywhere.

9. I also agreed to be available periodically to talk to customers in an effort to gradually introduce them to the new owner. I guess I should write something about that as it was a commitment.

Yes they will probably want it.

Seller agrees to help buyer with transition of business by communicating with existing customers about the merger and ensuring continuity of service. Something along these lines, feel free to modify.

10. The buyers are going to keep their own company and our company name separate as they both are already branded, but we would work together to add value to overall services to customers. We want to announce early on that we are "merging companies" to be able to improve on services. Thought that may help maintain accounts rather than risk some not wanting to deal with a new buyer from out of town. Then after the last payment is made by the buyer and customers are familiar with them, we could announce that I am retiring. What do you think about this strategy?. It is not quite the truth, but customers will still be contracted to GWS. The buyers also plan to keep using the contract people I have here in Bakersfield. My name is ***** ***** the name of the company. I do not even mention my name in the about us page of the website, but all my customers know me as the owner.

This would work for what you are doing here.

Customer: replied 4 months ago.
Thank you Ray for your help. I have adjusted my agreement accordingly. If I have any other question, I will get back to you.Joe Tallman

Joe good luck with all of this.

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