Buying or Selling a Business? Read the Deal First.
Where the price really goes, what the seller note costs, what can be claimed after closing and for how long, read from your side of the deal.
Quick answer
What should I check in a business purchase agreement?
First split the headline price into cash at closing, money held in escrow, a seller note paid over time and any earnout that depends on results. Then check the indemnity: the cap, the basket and how long claims survive. Buyers should check which liabilities stay with the seller and the conditions on the lease and key contracts; sellers should check security for the note and control of the earnout.
Who this business purchase review is for
- Buyers acquiring a small business, its assets or its shares
- Owners selling their business
- Buyers using SBA or bank financing with a seller note
- Advisers who want a structured first read before their own review
What's at stake
The Business Purchase clauses most people miss, and what they can cost you.
An $850,000 price is rarely $850,000 at closing
Part sits in escrow, part is paid over years on a seller note, and part depends on an earnout. We split the price so you can see what is guaranteed, what is held back, and what is contingent.
Problems found after closing may not be claimable
A 10% cap, a deductible and a 12-month deadline decide how much a buyer can recover, and how long a seller stays exposed. We turn them into dollars and dates.
The lease and the taxes can follow the business
A deal that closes without the landlord’s consent, or without tax clearance, can leave a buyer with a business and no premises, or with the seller’s unpaid taxes.
What the business purchase review checks
- Where the price goes: cash, escrow, seller note, earnout
- Seller note payment and total interest
- Indemnity cap, basket and claim deadlines in dollars and dates
- Liabilities that stay with the seller, and those that do not
- Earnout definitions and who controls the business
- Lease assignment and key contract consents
- Tax clearance and successor liability
- Seller non-compete and transition help
What you get
- The price split into guaranteed, held back, paid over time and contingent
- Seller note monthly payment and total interest
- Indemnity cap, basket and claim deadlines in dollars and dates
- Questions to raise, weighted for your side of the deal
How to review a business purchase agreement
- 1
Upload the agreement
The purchase agreement with its schedules, the seller note and any escrow agreement.
- 2
Choose your side and state
The same clause cuts opposite ways for a buyer and a seller, so the review is weighted for you.
- 3
See where the price goes
Cash, escrow, note and earnout, the note’s payment and interest, and the indemnity in dollars and dates, calculated in code.
- 4
Take it to your advisers
Questions for the other side, a redline and a reminder of what the agreement cannot show.
7 red flags in a business purchase agreement
What the review looks for first, and why each one matters.
An earnout the buyer controls, measured on vague terms
The seller’s payment depends on decisions the seller no longer makes.
An unsecured seller note
If the business struggles, the seller may be paid last or not at all.
No escrow or holdback
A buyer who finds a problem after closing has to pursue the seller directly.
A low indemnity cap with a short survival period
Problems found after a year may not be claimable at all.
Closing without the landlord’s consent to assign the lease
The buyer can end up with a business and no premises.
No tax clearance or bulk-sale step
In some states the seller’s unpaid taxes can follow the business.
A long, wide non-compete on the seller
It can stop the seller working in their field for years.
Business Purchase terms explained
- Asset purchase
- The buyer acquires selected assets and liabilities rather than the company itself.
- Stock purchase
- The buyer acquires the owner’s shares or membership interests, and with them the whole company.
- Seller note
- Part of the price the seller lends back to the buyer, repaid over time.
- Earnout
- Part of the price paid later only if the business hits agreed targets.
- Escrow or holdback
- Part of the price held back after closing to meet claims.
- Indemnity basket
- A threshold losses must pass before a claim can be made; a deductible basket excludes the threshold, a tipping basket does not.
- Survival period
- How long after closing claims for broken representations can still be brought.
Why review it with ClauseAudit
Results in minutes
Most contracts are read in about a minute; very long documents are split, read in full and returned as one report.
Read for your state
Successor liability for unpaid taxes, bulk-sale notices and sale-of-business non-competes vary by state. We show the general US position and tell you exactly what to confirm locally; we cite a state rule only once it has been checked against its source.
A fraction of a lawyer’s fee
From $19 a review. Take the report to an attorney and the conversation starts where it matters.
Plain English + a redline
Every risk explained, with a downloadable redline and a negotiation email.
One plan covers all eleven analyzers: Employment, Freelance, NDA, SaaS, Lease, Commercial Lease, Equipment & Vendor, MCA & Business Loan, Franchise, Business Purchase and Operating Agreement. Use your credits on any contract type.
Business Purchase contract FAQs
What should I check in a business purchase agreement?
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First split the headline price into cash at closing, money held in escrow, a seller note paid over time and any earnout that depends on results. Then check the indemnity: the cap, the basket and how long claims survive. Buyers should check which liabilities stay with the seller and the conditions on the lease and key contracts; sellers should check security for the note and control of the earnout.
Does this work if I am the seller?
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Yes. Choose your side when you upload. The same clause cuts opposite ways, so the review is weighted for you: a seller sees the risk in an unsecured note or an earnout the buyer controls; a buyer sees the risk in a low indemnity cap or no escrow.
Can you tell me if the price is fair?
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No, and no contract review can. Whether a business is worth its price depends on its books, tax returns, lease and customers. We read the agreement closely and show exactly what it commits you to, so the conversation with your accountant and attorney starts in the right place.
What is an indemnity basket?
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A threshold that losses must pass before the buyer can claim. With a deductible basket the buyer absorbs everything up to the threshold; with a tipping basket, once the threshold is passed the buyer can claim from the first dollar. We show which yours is, in dollars.
Should I review the lease as well?
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If the business trades from leased premises, yes. The lease often decides whether the business can stay where it is. Our commercial lease analyzer reviews it from the tenant’s side.
Can you tell me if the price is fair?
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No. Whether a business is worth its price depends on its books, tax returns, lease and customers, none of which are in the agreement. We show what the agreement commits you to, so your accountant and attorney start in the right place.
Should the lease be reviewed too?
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If the business trades from leased premises, yes. The lease often decides whether the business can stay where it is; the commercial lease analyzer reviews it from the tenant’s side.
Related reviews
Commercial Lease review
Tenant-side review of a commercial lease: the guaranty, the CAM, the exit, and the total over the full term.
Operating Agreement review
Your ownership, vesting, what a capital call or a distribution would do to you, and what you would be paid if you had to sell, read from your position among the owners.
MCA & Business Loan review
What you actually receive, what you repay, the estimated APR the agreement leaves out, and the clauses that can take your account or your house.
Check your business purchase agreement before you sign
Upload it, choose your options and get the report. One plan covers all eleven analyzers.
Review my purchase agreementWritten and maintained by the ClauseAudit team. Last reviewed . General information, not legal advice, and not reviewed by an attorney. For a high-stakes agreement, consult a qualified attorney.
Buying or selling a business? Upload the purchase agreement with its schedules and the seller note.
Review my agreementThe same agreement, read from your side of the table
A low indemnity cap protects the seller and exposes the buyer; an earnout the buyer controls is cheap for one side and uncertain for the other. We run 17 checks and weight them for your side. We describe what the agreement says and what it adds up to; we never tell you whether the business is worth the price.
Buying a business
You are acquiring a business, its assets or its shares
- Liabilities that follow the business to you, including unpaid taxes
- Little or no money held back to cover claims after closing
- Short survival periods and a low cap on the seller’s promises
Selling your business
You are selling your business, its assets or your shares
- Part of the price paid later, on a note or an earnout the buyer controls
- A seller note with no security and no personal guaranty
- Uncapped or long-lasting liability for your promises about the business