Instituto DARA

If you are planning to purchase an S corporation, it is essential to have a purchase agreement in place. An S corp purchase agreement is a legal document that outlines the terms and conditions of the sale. It protects both the buyer and the seller by spelling out their rights and obligations.

Here are some important components that should be included in an S corp purchase agreement:

1. Purchase Price: The agreement should clearly state the purchase price, including any contingencies that could affect the final price. These contingencies may include adjustments for changes in the company`s financial performance or liabilities that were not disclosed during due diligence.

2. Payment Terms: The agreement should specify how and when the buyer will pay the purchase price, including any financing arrangements. This may include an escrow arrangement to hold a portion of the purchase price until certain conditions are met.

3. Representations and Warranties: The seller will make certain representations and warranties about the S corporation, such as its financial condition, legal status, and ownership structure. These should be included in the agreement and should be subject to verification during due diligence.

4. Closing Conditions: The agreement should specify the conditions that must be met before the sale can be completed. These may include obtaining regulatory approvals, resolving outstanding legal disputes, or satisfying financing requirements.

5. Post-Closing Obligations: The agreement should address any obligations that the seller may have after the closing, such as assisting with the transition of the business or providing indemnification for certain types of liabilities.

An experienced attorney should draft the S corp purchase agreement to ensure that it meets the specific needs of both the buyer and the seller. It is essential that both parties review and understand the terms of the agreement before signing.

In conclusion, an S corp purchase agreement is an important legal document that should be given careful consideration. It protects both the buyer and the seller by establishing clear terms and conditions for the sale of the business. It is important to work with an experienced attorney to draft and review the agreement to ensure that it meets the needs of both parties.