Business Brokerage Transaction Terms

A clause used in a note and/or security agreement that gives the lender the right to demand payment in full if a certain event occurs such as default or if the ownership of the business changes without the lender’s consent; sometimes referred to as a “due on sale” clause.

The act of accepting an offer which results in a binding contract.

A written instrument that adds something to a written contract.

Also known as an “Exclusive Agency Listing.” A written instrument giving the agent the right to sell property for a specified time. However, the owner may sell the property himself/herself to a buyer who was not introduced to the business by the agent without the payment of a commission to the agent.

One acting under the authority of a principal to do the principal’s business. The agent must use his or her best efforts and keep the principal fully informed of all material facts.

A breakdown of the purchase price usually required when a business is sold. For example, the allocation might contain a breakdown of the inventories, fixtures and equipment, leasehold improvements, goodwill, and any other purchased assets. Generally, value is placed on each component of the allocation and the buyer and seller agree on this breakdown. The IRS requires that such an allocation be a part of the buyer’s and seller’s tax return when a sale takes place; Form 8594, the “Asset Acquisition Statement”, must be filed with the buyer’s and seller’s tax return for the year in which an applicable asset acquisition takes place.

A written instrument that changes something previously agreed to. (This is different than an addendum.)

1. A reduction in a debt obligation by periodic payments covering interest and part of the principal. 2. The writing off or expensing of the cost of intangible assets over a period of time, usually in years. Amortization of intangible assets vs. depreciation of tangible assets. Intangible assets purchased, such as goodwill and covenants-not-to-compete, can be written off over 15 years.

Asset purchase agreement.

A gain in value due to any cause. Real estate is an asset that often appreciates in value over time.