An asset purchase agreement ("APA") is a legal contract that outlines the terms and conditions under which one party (the buyer) agrees to purchase certain assets from another party (the seller), for example, a business. The assets in question could be tangible, such as furniture, fixtures, and equipment ("FF&E"), or intangible, such as intellectual property, trade name(s) or customer lists. An APA is used when the 'business" is being purchased but not the corporate entity (Inc. or LLC) owning the assets. If the entity itself is being purchased, then a "Stock Purchase Agreement" is used rather than an APA. The agreement typically includes details about the assets being sold, the purchase price, any financing arrangements, and any conditions that must be met before the sale can be completed. It may also include provisions for warranties, indemnification, and other important issues. The purpose of an asset purchase agreement is to clearly define the rights and obligations of the buyer and seller and to protect the interests of both parties. It is important for both parties to carefully review and understand the terms of the agreement before signing, as it can have significant legal and financial implications. Most small business transfers are an "asset purchase" rather than a "stock purchase." Be aware of the two different uses of the term "asset purchase": While most small business deals are in effect a purchase of all the assets of the business, the term can also be used to refer to the purchase of just the physical FF&E of a business that is no longer an open and operating ("going") concern. On BizBen.com, the designation "asset sale" is used to indicate this kind of limited FF&E/tangible asset transfer.
