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What is an asset purchase agreement?

New Jersey residents who wish to get into business ownership can do so through a number of different paths. Some individuals may choose to create their own corporate entities. Doing so can involve a lot of work to plan the business's structure, to create bylaws and to create other necessary operating documents. They also need to fulfill all of the state and federal filing requirements necessary to have the business recognized.

Individuals may also buy existing businesses as a means to achieve business ownership. There are different ways in which a party may acquire an existing business -- it may purchase the business's stock or it may purchase the business's assets.

When a party chooses to buy an existing business's assets then it must execute an asset purchase agreement. The assets of a business can be wide and varied, ranging from physical buildings and manufacturing facilities, company-owned vehicles and equipment, stocked inventory of products and materials and other items. When a party signs an asset purchase agreement it can decide if it wants to assume all of the existing entity's liabilities. It can also avoid some of the headaches that come with stock purchases, in that asset purchases do not always have to follow state and federal securities rules.

This blog post provides a simplification of what an asset purchase agreement is and what it can do for a business buyer. It should not be relied on as a comprehensive discussion of the complete asset purchase agreement process. Parties that wish to acquire business ownership rights over existing businesses may choose to work with business law attorneys who can help them draft the asset purchase agreements and other necessary business documents to fulfill their business ownership dreams.

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