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What is an asset purchase agreement?

When you want to acquire pieces of another business - whether that property is tangible or intangible - you will need to make an asset purchase agreement, otherwise known as an APA. But what is an APA exactly, and how does it facilitate your company’s growth?

According to The Business Dictionary, the technical definition of an APA is the agreement between a seller and buyer that allows the buyer to utilize some assets of the seller’s company. This can be anything from ideas and patents to actual finished products to the structural system of a company. While there are some APAs that end with the buyer purchasing every part of the seller’s company, there are even more instances where only certain parts are bought.

This is essentially the way that an acquisition legally occurs. If you would like to merge your business with another or acquire someone else’s business, you will need to make an APA. Under this agreement, you will also need to pay for the gains you make, as well as certain aspects of the business itself. Some possible things that you may need to pay for include monthly installments, asset encumbrances, the purchase price and liens. Additionally, under an APA, you will not automatically gain the title to assets, company shares, or the title to liabilities.

Like all agreements, your APA may differ depending on the company you contract with and the things that you are looking for. Know how to utilize your purchase of assets to advance your own business.

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