Understanding an Arizona Asset Purchase and Indemnification Agreement

Buying a business can be exciting, but the purchase process is understandably stressful. The due diligence period can reveal any number of issues with taxes, liens or other encumbrances. There are also seemingly endless documents to be reviewed, including an asset purchase and indemnification agreement. This particular document details the responsibilities of the buyer and seller once an asset purchase transaction has closed, and it can help navigate the business relationship in the event of future disputes.

An Arizona asset purchase agreement is an important document intended to help purchasers and sellers. Here’s what you need to know.

Arizona Asset Purchases, Explained

There are two main ways to buy a business: Purchasing the company that owns the business, known as an entity purchase, or purchasing the assets of that business. An asset purchase occurs when an individual or organization purchases some or all of the assets of the business that is selling, such as equipment and inventory.

The key difference between a stock purchase and an asset purchase is that in the latter, the buyer does not assume any ownership over the business entity. It also differs from a stock purchase, in which the buyer purchases the selling company’s stock.

Using an Arizona Asset Purchase Agreement

Any entity that owns a business bears the burden of liabilities such as contracts, employee issues, lease obligations, tort liabilities or other obligations related to its assets including tax liabilities. Therefore, buyers interested in ownership of a business would also assume those same liabilities.

Most business purchases are made via asset purchase because buyers typically want to avoid the assumption of liabilities. Generally, the buyer is only liable for the liabilities of the seller that are outlined in the asset purchase agreement. Other liabilities not expressly stated in the agreement do not have to be satisfied. This is why interested buyers should negotiate with sellers regarding which (if any) liabilities the buyer will assume after closing.

Find an Experienced Real Estate Attorney

At MacQueen & Gottlieb, we have significant experience with the purchase and sale of businesses in Arizona. Our attorneys can make sure you complete a thorough due diligence investigation and provide you with purchase documents structured with your interest in mind. If you are considering purchasing a business, contact us today at 602-562-7218 to schedule an initial consultation or make an appointment online.