4 years ago when I set up the Microns.io marketplace, my goal was to make it easy for founders and aspiring entrepreneurs to buy and sell profitable online businesses at the best prices. We’ve achieved that.

Regardless, there are many moving parts to trading businesses on an online marketplace – building a connection with the buyer/seller, negotiating, writing contracts, transferring assets, etc. One such contract commonly used in asset exchange is an asset purchase agreement: this document ensures the smooth exchange of assets and protects both parties.

In this article, I’ll show you everything you need to know about the document and how to write one.

Let’s get into it.

What is an asset purchase agreement?

An asset purchase agreement is a legally binding contract that outlines the terms and conditions under which a transaction (the buying and selling of businesses/assets) can be completed.

This legal document, also called a purchase contract, contains vital information that protects both parties by clearly stating the obligations of both the buyer (to purchase the business) and the seller (to transfer the company). Originally, it was used for traditional businesses and physical assets; however, the sale of online businesses and intangible assets such as IP, patents, trademarks, etc., also require an asset purchase agreement.

Why do you need an asset purchase agreement?

You need an asset purchase agreement (APA) to prove that both parties are legally bound by a contract to carry out obligations due for the completion of the transaction. For example, if you’re selling or buying a business, and you work out a payment plan where a certain amount will be paid after a milestone, this will be noted in the purchase contract.

Also, it takes away confusion from the sales process by putting all the fine details in writing to cover both parties. As earlier stated, an asset purchase agreement aims to protect both parties against discrepancies. In the event of a dispute, an asset purchase agreement document can be tendered in court.

Moreso, it details all the transferrable assets; in our case, the online business such as a micro-SaaS startup, newsletter, or an ecommerce store and everything associated with it. Any related asset or liability not listed in the agreement belongs to the seller.

READ: Profitable micro-SaaS ideas

Do you need an asset purchase agreement?

Yes, you do need an asset purchase agreement if you’re selling a business or any other asset. The APA will help both parties reduce risks by outlining the assets involved in the sale, whether it’s the whole business or parts of it.

READ: Microns.io vs Acquire

Who prepares an asset purchase agreement?

Both the buyer and the seller play a role in preparing an asset purchase agreement. The buyer drafts the APA while the seller reviews it to make the necessary adjustments before both parties can accept the terms.

READ: Microns.io vs Flippa

What should I include in an asset purchase agreement?

Your APA will contain terms related to the transaction that’ll be clearly defined to remove ambiguity from the process. Here are the most important terms to include in the document.

Buyer and seller information

This section is usually the opening paragraph of the APA. It should contain the full legal names of both parties as well as the name of the business to be transferred.

Definitions

The aim of this section is to make both parties clearly understand the terminologies that’d be used throughout the document so there’s no confusion.

For example, if multiple assets are involved in the transaction with them being delineated as Asset 1, Asset 2, Asset 3, etc., it’d be appropriate to explain what each represents.

Also, if the business has an alternate name that’d be used in the document, this is where you highlight that the alternate and original names are the same.

Asset description

In this section, you’ll describe the assets being bought, including their liabilities, condition and warranties.

Purchase price

This section of the APA details the cost price the buyer will pay for the business. Here, you’ll outline the payment plan if there is, and any liabilities the seller will be taking on.

Employees

If you’d love to continue with the seller’s employees or contractors, you can include that in the APA.

Dispute resolution

This section will contain how disputes will be settled should any arise to protect both parties.

Termination conditions

Your APA can also cover what happens if the transaction falls through. Plus it should outline the conditions under which the deal can and cannot be closed.

Warranties

An asset purchase agreement may contain warranties in the form of promises to protect the seller. In the case of micro-SaaS businesses, the warranty could be a promise made by the seller for which they will be liable if the business fails to live up to expectations.

Indemnification

If either party defaults in the contract or does something that affects the whole process, this clause protects the other party by making the offender undertake some financial responsibility for the damage.

Closing conditions

This section specifies what most parties must do to finalise the deal. It also contains any non-disclosure agreements and non-compete agreements that need to be signed.

Signatures

To seal the deal and make the document legally binding, the final part is for both parties to input their dated signatures.

Workflow for managing an asset purchase agreement

If you’ve found a business you’d love to buy on the Microns marketplace, here’s the process to draft the first iteration of an APA.

1. Negotiation

Before you draft the APA, you need to contact the seller to inquire about the business. During this stage, you’re trying to establish a relationship with the seller and negotiate the purchase price.

2. Due diligence

After deliberating on the price, it’s time to do your due diligence to ensure all the seller’s claims are true. You’re going to check if the business is worth its evaluation by assessing its traffic data, income, marketing channels, etc.

3. Draft the agreement

After confirming the data provided by the seller, it’s time to draft the asset purchase agreement. This is where you cover all the details outlined earlier.

4. Document review and approval

After drafting the contract, you then send it to the seller to review the terms and conditions, who can then revise it to ensure all bases are covered. Once both parties are satisfied, you can then sign the contract.

Wrapping up

An asset purchase agreement is a very important document you need to finalize your deal on Microns.io. You can start your journey toward owning an online business today by checking out our list of profitable online businesses and contacting the seller.