How to Review a Business / Asset Purchase Agreement
A practical review order for a business or asset purchase agreement before either side signs — from the deal structure to the indemnification cap.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
A business sale runs on the purchase agreement: an asset purchase agreement (APA) or a stock/equity purchase agreement (SPA). It decides what transfers, what liabilities follow, how the price can move after closing, and who pays if a representation turns out to be false.
The biggest risk usually sits in the indemnification package and the post-closing adjustments — not the headline price. Review the deal structure first, then price and adjustments, then reps and indemnity, then the closing conditions.
Topics to check
Confirm whether this is an asset purchase or a stock/equity purchase. In an asset deal the buyer generally picks the assets and assumed liabilities and can leave the rest behind; in a stock deal the buyer takes the entity with all of its liabilities. This single choice drives liability, tax, and consent issues throughout the agreement.
Then read the assumed-vs-excluded-liabilities schedules carefully — in an asset deal, the value of "leaving liabilities behind" is only as good as those schedules.
IRS — Sale of a BusinessA buyer wants robust representations that survive long enough to find problems, a meaningful indemnity escrow, a tight working-capital true-up, a strong non-compete, and HSR/consents as conditions to closing. A seller wants short survival, a low cap with a high basket, prompt escrow release, a clean adjustment, and a firm closing.
Decide which side you are on, then test the indemnity, survival, cap, basket, escrow, working capital, and earnout terms against that goal.
Most of an APA/SPA is contract and state common law. But a few federal regimes apply regardless of the contract: purchase-price allocation and tax reporting (IRS Form 8594), antitrust premerger notification for larger deals (HSR), and the WARN Act for layoffs tied to the transaction.
Use the contract to allocate private risk, but confirm tax, antitrust, and employee-notice obligations with qualified advisors.
FTC — Premerger Notification (HSR) ProgramKey takeaways
- Confirm asset vs stock/equity structure first — it drives liability, tax, and consents.
- In an asset deal, the assumed/excluded-liability schedules are where the value is.
- Most risk sits in indemnification and post-closing adjustments, not the headline price.
- Review from your side: buyer and seller want opposite things from the indemnity package.
- Confirm tax (Form 8594), antitrust (HSR), and WARN obligations with advisors.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Review order and clause priorities are general guidance, not jurisdiction-specific conclusions.
- Indemnity, non-compete, and tax outcomes vary by state and structure and require counsel and tax-advisor review.
Frequently asked questions
What is the difference between an asset purchase and a stock purchase?
In an asset purchase the buyer acquires selected assets and assumes only specified liabilities, leaving the rest with the seller. In a stock (or equity) purchase the buyer acquires the company itself, including all of its liabilities. Asset deals are usually buyer-friendly on liability; stock deals are simpler but carry more risk.
What is the riskiest part of a purchase agreement for a buyer?
Usually the indemnification package — the survival period, cap, basket, and whether indemnity is the exclusive remedy — combined with the post-closing working-capital adjustment and earnout. These decide whether the buyer can recover if the business is not what it was represented to be.
Is this legal advice?
No. This is general information. Enforceability of indemnity, non-compete, and exclusive-remedy terms, and the tax treatment of the deal, depend on the exact language and the facts — confirm with qualified M&A counsel and a tax advisor.