At Hayes Hunter PC, we recently had the pleasure of assisting a family-owned business completing the sale of their business assets and real property in a significant transaction. As Houston business attorneys, our mission in the sale of a business is to protect our clients’ interests and ensure a smooth transition throughout the transaction process. This sale was structured through two separate agreements: an Asset Purchase Agreement for the business and a Real Estate Sales Contract for the real property where the business is located. The total purchase price was $1.95 million, with $1.4 million allocated to the business assets and $550,000 to the real estate.
Structuring a Business Sale: Asset Purchase Agreement vs. Real Estate Contract
When selling a business that includes both operational assets and the property where the business operates, it is essential to differentiate between the two types of contracts needed to complete the transaction:
- Asset Purchase Agreement: An Asset Purchase Agreement typically covers the sale of all business-related assets, including inventory, equipment, goodwill, customer lists, and intellectual property. This agreement is structured to transfer the business assets to the new owner while also protecting the seller from liabilities incurred after the sale date. For the recent transaction, the Asset Purchase Agreement outlined the specifics of transferring ownership and defined the purchase price allocation for each category of assets.
- Real Estate Sales Contract: If the business owns real property, a separate contract may be required for its sale and acquisition. This agreement covers the building, land, and fixtures. In this case, our client sold the commercial building using a Real Estate Sales Contract, which clearly defined the terms, contingencies, and specific property disclosures. As Houston business transactional attorneys, we made sure all aspects of the property sale complied with applicable state and federal laws and regulations.
Key Considerations in Business Sales
Selling a business is a complex process that involves numerous considerations, particularly when both the business and its real estate are being sold. As Houston lawyers experienced in business sales, we addressed the following concerns:
- Valuation: Determining the value of both the business and its real estate separately is crucial. For our client, the business value of $1.4 million reflected factors like current inventory, ongoing contracts, equipment, and the goodwill of a well-established customer base. The property, on the other hand, was valued based on market conditions and comparable sales in the Houston area.
- Liability Transfer: Usually, the Asset Purchase Agreement separates pre-closing liabilities as the responsibility of the seller and ensures that only future liabilities are passed to the buyer.
- Security for Seller Financing: Properly securing the loan is critical when seller financing is part of a transaction. In this transaction, the business and its assets were used as collateral for the deferred payments of the Asset Purchase Agreement under a financing security agreement. The real estate sale was protected by a lien on the property through a Deed of Trust. This comprehensive security structure reduced risk for our client by establishing a clear legal pathway for recourse should the buyer default on any part of the transaction financing agreements.
Ensuring a Smooth Closing Process
The sale of a business involves numerous moving parts, especially when it encompasses both business assets and real estate. As Houston business transactional attorneys, our team at Hayes Hunter PC ensured that every aspect of the transaction—from drafting contracts to final closing documents—was meticulously handled. We are proud to have facilitated a successful outcome for our clients, providing them with a secure sale and a foundation for their next chapter.
If you are considering selling your business or real estate in the Houston area, Hayes Hunter PC can guide you through every step of the process. With our experience as Houston business attorneys and transactional lawyers, we work to ensure that your interests are protected, and your goals are achieved. Contact us today to learn more about how we can support your business transactions.
