Section 197 Transfer Agreement Template

If you are considering purchasing a business, it is important to understand the Section 197 transfer agreement and have a solid template in place. A Section 197 transfer agreement is a tax law provision that allows you to allocate the purchase price of a business to various assets. This allocation can impact the tax treatment of the transaction and can also impact the financial statements of the buyer and the seller.

A Section 197 transfer agreement template should include the following elements:

1. Definition of Assets: The agreement should include a detailed description of the assets being transferred, including tangible assets such as equipment and inventory, as well as intangible assets such as goodwill, trademarks, and patents.

2. Purchase Price: The agreement should specify the purchase price of the business and how it will be allocated among the various assets. This is important because it can impact the tax treatment of the transaction for both the buyer and the seller.

3. Payment Terms: The agreement should clearly spell out the payment terms, including the timing and method of payment.

4. Representations and Warranties: Both the buyer and the seller should make certain representations and warranties in the agreement. These typically include warranties related to the ownership of assets, the absence of liens and encumbrances, and the accuracy of financial statements.

5. Indemnification: The agreement should include provisions for indemnification, which is a way to allocate risk between the buyer and the seller. The seller typically indemnifies the buyer for any losses resulting from a breach of the seller’s representations and warranties.

6. Closing Conditions: The agreement should include provisions regarding the conditions that must be met before the transaction can close. These may include obtaining regulatory approvals, securing financing, and obtaining consents from third parties.

A Section 197 transfer agreement template should be tailored to the specific transaction and the parties involved. It is important to have a qualified attorney review any agreement before it is executed.

In conclusion, a Section 197 transfer agreement is an important tax provision when purchasing a business. A solid template should include a detailed description of assets, purchase price allocation, payment terms, representations and warranties, indemnification, and closing conditions. It is important to have a qualified attorney review any agreement before it is executed.