Asset Purchase Agreement Template: How to Write One

An asset purchase agreement (APA) is the contract that governs how one business buys the assets of another. It decides what changes hands, what stays behind, who is responsible for past problems, and how the money moves. Get it right and a sale closes cleanly. Get it wrong and the buyer can inherit debts it never agreed to, or the seller can walk away exposed to claims for years.

This guide explains what an asset purchase agreement is, how it differs from a stock purchase, which clauses do the real work, and how to write one step by step.

What Is an Asset Purchase Agreement?

An asset purchase agreement is a legally binding contract in which a buyer acquires specific assets of a seller's business rather than the business entity itself. The seller keeps the legal company; the buyer takes the pieces it wants.

That distinction is the whole point. In an asset deal, you choose your purchases. You can buy the equipment, the customer list, and the brand while leaving behind a lawsuit, an underwater lease, or a pile of trade debt. The agreement spells out exactly which assets transfer and which liabilities, if any, the buyer agrees to assume.

Asset purchases are common in small-business sales, the carve-out of a single product line or location, and acquisitions where the buyer wants the operations but not the corporate baggage.

Asset Purchase vs. Stock Purchase

These two structures lead to very different outcomes, so settle on one early.

Asset Purchase

• Buyer selects which assets and liabilities to take
• Buyer generally avoids the seller's unknown debts
• Buyer gets a stepped-up tax basis in the purchased assets
• More paperwork: each asset, contract, and permit may need its own transfer or consent

Stock Purchase

• Buyer acquires the ownership shares of the entity
• The company continues unchanged, contracts and all
• Buyer inherits every liability, known and unknown
• Cleaner mechanically, since the entity itself does not change hands

Buyers usually push for an asset deal because of the liability protection and the tax basis step-up. Sellers often prefer a stock deal because share sales are frequently taxed at lower capital-gains rates and avoid the double layer of tax that can hit a C-corporation asset sale. The structure you land on is a negotiation, and it shapes every other term in the agreement.

If the deal is really about an owner exiting a closely held company, you may also want a buy-sell agreement governing how the remaining owners handle the departure.

What Assets Are Included?

The agreement should attach a schedule listing each category of purchased asset. Anything not listed stays with the seller, so the schedules carry as much weight as the body of the contract. Typical categories include:

• Tangible assets: equipment, machinery, furniture, vehicles, and inventory
• Accounts receivable: outstanding customer invoices, if the buyer is taking them
• Intellectual property: trademarks, patents, copyrights, trade secrets, and software
• Contracts: customer agreements, supplier contracts, and service arrangements the buyer wants to continue
• Goodwill: the going-concern value, brand reputation, and customer relationships
• Digital assets: domain names, websites, social accounts, and data
• Permits and licenses: to the extent they are transferable
• Leases: real property or equipment leases, subject to landlord or lessor consent

Excluded Assets

Just as important is the excluded assets schedule: cash on hand, personal property of the owner, certain contracts, and anything the seller is keeping. Listing exclusions removes ambiguity about what the buyer is actually paying for.

What Liabilities Does the Buyer Assume?

The default rule in an asset purchase is that the buyer assumes only the liabilities it expressly agrees to take. The agreement names these in an assumed liabilities schedule, such as obligations under a continuing customer contract or a transferred lease.

Everything else stays with the seller as excluded (or retained) liabilities. That is the protection buyers are paying for.

Watch the exceptions, though. A clean contract does not always defeat successor liability. In some states and situations, certain obligations follow the assets no matter what the agreement says:

• Unpaid sales and payroll taxes
• Environmental cleanup obligations
• Bulk-sales law claims from the seller's creditors
• Liabilities where the buyer is essentially a continuation of the seller's business

These risks are usually managed with indemnification, escrow holdbacks, and thorough diligence rather than contract language alone.

Tax Considerations

Taxes are often the real reason the parties argue over structure, so it helps to understand the basics before you draft.

In an asset sale, the buyer gets a stepped-up basis in the assets it buys, which means it can depreciate or amortize them going forward and lower its future taxable income. That is a genuine benefit, and it is why buyers will sometimes pay a little more for an asset structure.

The seller's side is messier. If the seller is a C-corporation, the gain can be taxed twice: once at the corporate level when the assets are sold, and again at the shareholder level when the proceeds are distributed. That double layer is the main reason corporate sellers push for a stock deal instead.

The purchase price allocation ties directly into all of this. Value assigned to inventory or equipment is generally taxed as ordinary income to the seller, while value assigned to goodwill is usually taxed at lower capital-gains rates. The buyer often wants the opposite split because faster-depreciating assets give quicker deductions. Because both sides report the allocation on Form 8594, the numbers have to match, so settle them in the agreement rather than leaving them to a post-closing scramble.

Asset Purchase Agreement vs. Bill of Sale

People sometimes confuse the two, but they do different jobs. The asset purchase agreement is the master contract: it sets the price, the representations, the indemnification, and the conditions to closing. The bill of sale is one of the documents delivered at closing to actually transfer title to tangible property.

In other words, the agreement promises the sale and governs the terms; the bill of sale executes part of it. A typical closing also includes assignment agreements for contracts and intellectual property, lien releases, and consents. The agreement is the deal; the closing documents are how the deal is carried out.

Key Clauses in an Asset Purchase Agreement

1. Purchase Price and Allocation

State the total price and how it is paid: cash at closing, a promissory note, an earnout tied to future performance, or a mix. Then allocate the price across asset classes. Both parties typically report the same allocation to the IRS on Form 8594, and the split drives the tax result for each side. Negotiate the allocation before closing, because it is much harder to agree on after the money has moved.

2. Assumed and Excluded Liabilities

Spell out precisely which liabilities transfer and which do not. This clause, paired with its schedules, is the heart of the buyer's liability protection.

3. Representations and Warranties

These are factual promises about the state of the business. The seller typically represents that it owns the assets free of liens, that financial statements are accurate, that there is no undisclosed litigation, and that it has complied with applicable laws. The buyer represents that it has authority to enter the deal. False reps give the wronged party a path to recover.

4. Covenants

Promises about conduct between signing and closing, and sometimes after. The seller usually agrees to run the business normally until closing and not to sell off assets. Post-closing covenants often include a non-compete and a non-solicitation commitment so the seller cannot reopen across the street or poach the customers it just sold. A standalone non-solicitation agreement can reinforce this where state law limits broad non-competes.

5. Conditions to Closing

The list of things that must happen before either party is obligated to close: required third-party consents, lien releases, regulatory approvals, and delivery of key documents. If a condition is not met, the affected party can walk.

6. Indemnification

This clause decides who pays when something goes wrong after closing, whether an undisclosed liability surfaces or a representation turns out to be false. It sets caps, baskets (a minimum threshold before claims kick in), survival periods, and sometimes an escrow holdback to back the seller's promises. For a deeper look at how this works, see our guide to writing an indemnification agreement.

7. Governing Law and Dispute Resolution

Name the state whose law applies and where disputes get resolved. This avoids a fight over forum before anyone reaches the merits.

How to Write an Asset Purchase Agreement: Step by Step

Step 1: Identify the parties. Use full legal names and entity types. Confirm the seller is the entity that actually owns the assets, not an affiliate or the owner personally.

Step 2: Describe the assets. Draft the included-assets and excluded-assets schedules. Be specific. "All equipment located at 100 Main Street as listed in Schedule A" beats "the equipment."

Step 3: Set the liabilities. List assumed liabilities. State clearly that all other liabilities are retained by the seller.

Step 4: Fix the price and allocation. Write the total, the payment mechanics, and the allocation across asset classes. Note any holdback or escrow.

Step 5: Draft reps and warranties. Cover ownership, liens, financials, litigation, taxes, and compliance. Add a disclosure schedule where the seller can flag known exceptions.

Step 6: Add covenants and closing conditions. Cover conduct before closing, any non-compete, and the consents and deliverables required to close.

Step 7: Write the indemnification terms. Set caps, baskets, survival periods, and the escrow amount if any.

Step 8: Plan the closing. List what each side delivers at closing: bills of sale, assignment agreements, lien releases, and the funds. Then both parties sign, with authorized signatories for entities.

Common Mistakes to Avoid

Vague asset schedules. If a key contract or piece of IP is not listed, it does not transfer. Inventory the business carefully before drafting.

Ignoring third-party consents. Many contracts and leases cannot be assigned without the other party's approval. Identify these early; a missed consent can stall or kill a closing.

Skipping liability diligence. The buyer's protection only works if the buyer knows what it is leaving behind. Check tax accounts, liens, pending claims, and employee obligations before signing.

Leaving price allocation for later. Unallocated deals turn into tax disputes. Agree on the split in the contract.

Weak or missing indemnification. Without caps, survival periods, and an escrow, reps and warranties are promises with no teeth. This clause is where post-closing surprises get resolved.

Forgetting employees. Decide whether the buyer is rehiring staff, who handles accrued PTO and final paychecks, and whether the seller must give WARN Act notice for larger layoffs.

When to Use an Asset Purchase Agreement

• Buying a small business where you want the operations but not the seller's legal entity
• Carving out a product line, brand, or location from a larger company
• Acquiring a competitor's customer list, equipment, or IP without taking on its debts
• Winding down a company by selling its assets piece by piece
• Any deal where limiting exposure to the seller's past liabilities is a priority

Even when the relationship between the parties is friendly, the agreement is what protects both sides if a dispute surfaces months later. Pair it with the right closing documents, such as bills of sale, IP assignments, and a hold harmless agreement where one party takes on a specific risk, and the transfer holds up.

Generate Your Asset Purchase Agreement with Contractable

Drafting an asset purchase agreement is manageable once you understand the structure, but getting the schedules, reps, and indemnification right for your specific deal takes care. Contractable generates a customized asset purchase agreement in minutes, with the clauses and schedules tailored to what you are buying or selling. No legal background required.