By Phillip Mitchell, Founder & Chief Brokerage Officer, AIExchange.club
Market figures are as of October 2026, from the sources linked below. Tax notes are federal-only. This is general information, not legal or tax advice. Have a lawyer draft or review your agreement.
An asset purchase agreement (APA) is the contract that sells a business's assets to a buyer, rather than selling the company itself. In business, "APA" almost always means this. Most small SaaS, app and AI business sales are done this way, which is why people also search for it as a business purchase agreement, a business sale agreement or simply the contract for selling a business.
Most guides to the APA are written for lawyers or for buyers. This one is written for the seller. It covers what the agreement does, what a software sale actually transfers, the clauses worth negotiating, and the market numbers to negotiate against, with a worked example on a $500k sale.
What is an asset purchase agreement?
An asset purchase agreement is the binding contract between buyer and seller in an asset sale. It sets out:
- What's being sold: the specific assets, listed in schedules, and what's left out.
- Which liabilities the buyer takes on: usually only the ones named in the agreement. Everything else stays with your company.
- The price and how it's paid: cash at closing, money held in escrow, and any deferred payments.
- The promises each side makes: the seller's representations and warranties about the business.
- What happens if a promise turns out to be false: indemnification, and the limits on it.
- What has to happen at closing: the documents signed, the accounts transferred and the money released.
The buyer's lawyer usually writes the first draft, and the negotiation happens in the mark-ups that follow.
Where the APA fits in a sale
The APA comes late in the process. The order is usually:
- NDA: the buyer agrees to keep your information confidential.
- Letter of intent: a mostly non-binding summary of price, structure and timeline, plus a period where you agree not to talk to other buyers.
- Due diligence: the buyer checks your numbers, code, accounts and contracts.
- Asset purchase agreement: the letter of intent becomes a binding, detailed contract.
- Closing: both sides sign, the buyer pays, and the assets move.
The price is usually settled at the letter of intent stage. The APA is where you find out what that price really means: how much is paid at closing, how much is held back, and how much you could owe later. For the full process, see how to sell a SaaS business.
Asset purchase agreement vs stock purchase agreement
| Asset purchase agreement | Stock purchase agreement | |
|---|---|---|
| What's sold | Selected assets of the business | The owners' shares in the whole company |
| Liabilities | Buyer takes only those listed | Buyer inherits all of them, known and unknown |
| Transfer work | Each asset moves separately; some contracts need consent | Nothing moves; the company just has a new owner |
| Common for | Small SaaS, app and online business sales | Larger companies and C-corp sellers |
Which one you use has a big effect on tax, especially for C-corp owners. Our guide to asset sale vs stock sale runs the numbers on a $1M SaaS.
What a SaaS or app sale actually transfers
Generic templates list "equipment, inventory and goodwill." A software business is mostly accounts and code, and each one moves differently. The APA's asset schedule should name every item.
| Asset | How it usually moves | Watch out for |
|---|---|---|
| Source code and repositories | Repo ownership transferred, plus an IP assignment in the APA | Code written by contractors needs their written assignment to you first |
| Domain and DNS | Moved to the buyer's registrar account | Email and other services run on the domain, so plan the timing |
| App Store and Google Play listings | Each store's built-in app transfer | Some settings must be rebuilt; see how app store accounts transfer |
| Payment processor and subscriptions | Usually a customer and subscription data migration to the buyer's account | Accounts are tied to your company; ask your processor how it handles a sale early |
| Customer data and email list | Exported or the account handed over | Your privacy policy must allow the transfer |
| Customer contracts | Assigned to the buyer | Contracts that ban assignment need the customer's consent |
| AI model and API accounts | New keys on the buyer's own accounts | Rate limits, pricing tiers and credits may not carry over |
| Brand, trademarks, content and social accounts | Assigned or handed over | Assign registered trademarks in writing and record the change with the trademark office |
| Third-party tools and hosting | Account handover or new accounts with data moved | Annual plans and seats in your name |
The clauses that matter, in order
Use this as a checklist when the first draft arrives. Most of the money is decided in the purchase price, reps and warranties, and indemnification clauses.
| Clause | What it does | Mainly protects | What to push for as the seller |
|---|---|---|---|
| Purchased and excluded assets | Lists exactly what's sold and what you keep | Both | Exclude cash, your personal accounts and anything you use in other businesses |
| Assumed and excluded liabilities | Says which obligations the buyer takes over | Buyer | The buyer should take over obligations to serve prepaid customers after closing |
| Purchase price and payment | Cash at closing, escrow, deferred payments | Both | Most of the price at closing; a short, small escrow |
| Prepaid revenue adjustment | Credits the buyer for annual plans you've already been paid for | Buyer | A clear formula agreed before signing, not after |
| Representations and warranties | Your promises about the business | Buyer | Limit them to what you know, and list exceptions in the disclosure schedules |
| Indemnification | What you owe if a promise is false | Buyer | A cap, a basket and a short survival period |
| Non-compete and non-solicit | Stops you competing or taking customers | Buyer | Narrow scope, limited time, defined market |
| Transition support | Your help after closing | Buyer | A fixed number of weeks and hours, with paid time after that |
| Price allocation | Splits the price across asset classes for tax | Both | Weight it toward goodwill |
| Closing conditions and deliverables | What must happen before money moves | Both | A short, specific list you can deliver |
Purchase price, escrow and holdback
The headline price is rarely all paid at closing. Part is usually held in escrow by a third party for a set period, to cover any claims the buyer makes. Part may be deferred through a seller note, which is a fixed amount paid over time, or an earnout, which is paid only if the business hits targets after the sale. Know which is which before you sign, because they carry very different risk.
For SaaS businesses with annual plans, expect the buyer to ask for a credit for prepaid revenue. You've already been paid for months of service the buyer will have to deliver. Agree the formula in the APA so it doesn't become an argument at closing.
Representations and warranties
These are your promises about the business: that you own what you're selling, that the revenue and retention numbers you shared are accurate, that there are no undisclosed disputes, and that you've followed privacy law. Three ways to limit your exposure:
- Knowledge qualifiers: "to the seller's knowledge" means you're promising what you know, not guaranteeing the unknowable.
- Disclosure schedules: list every known exception (a customer dispute, a missed tax filing, a contractor without a signed agreement). A disclosed issue usually can't be claimed against you later.
- Survival period: how long the promises last after closing. After it ends, the buyer can't claim.
Indemnification, caps and baskets
Indemnification is what you pay the buyer if a promise turns out false. The three numbers that limit it:
- Cap: the most you can owe in total for broken general promises.
- Basket: a threshold claims must reach before you pay anything, so small issues don't turn into claims.
- Survival: how long the buyer has to make a claim.
Promises about owning what you're selling, your authority to sell it, and fraud usually sit outside the general cap. Expect those to last longer and be capped higher.
Non-compete and transition support
Buyers will ask you not to build or join a competing product for a period, and not to approach customers or staff. Keep it narrow: a defined product category, a defined time and no broader than the business you're selling. For handover, agree a fixed support period in hours or weeks, with anything beyond it paid. On larger deals, this sometimes becomes a separate transition services agreement.
Purchase price allocation
An asset sale splits the price across asset classes, and both buyer and seller generally report that split to the IRS on Form 8594 with their tax return for the year of sale (IRS, Instructions for Form 8594). Goodwill is the last class. For most owners, price allocated to goodwill is taxed as a long-term capital gain, while price allocated to a non-compete is taxed as ordinary income. Agree the allocation in the APA; see asset sale vs stock sale for how much it can matter.
What's "market": the numbers to negotiate against
SRS Acquiom's 2025 Deal Terms Study covers more than 2,200 private acquisitions closed from 2019 to 2024 (SRS Acquiom, 2025 M&A Deal Terms Study). For 2024 deals outside life sciences:
| Term | Market figure (2024 deals) |
|---|---|
| Deals with at least one escrow | 89% |
| Indemnification escrow size | Median 9.0% of the price (average 7.8%) |
| Cap on general indemnification, deals without insurance | Median 10.0% of the price (average 14.6%) |
| How long general promises survive | Median 12 months |
| Basket | 22% of deals had none; 57% of baskets were 0.5% of the price or less |
One caveat: these deals are mostly much larger than a typical SaaS marketplace sale, and larger deals often use reps and warranties insurance instead of a big escrow. The ABA's 2025 study of $25M to $900M deals found insurance referenced in 63% of them (K&L Gates summary). At small-SaaS size, expect an escrow instead. The figures above are still useful anchors: if a draft asks for a 25% escrow held for 24 months, you know it's well above market.
Worked example: a $500k SaaS sale
A SaaS business producing about $165k of SDE sells for $500k in an asset sale. Using terms close to the market medians:
| Term | Amount |
|---|---|
| Paid at closing | $450,000 |
| Held in escrow for 12 months (10%) | $50,000 |
| Cap on general indemnification (10%) | $50,000 |
| Basket (0.5%) | $2,500 |
Eight months after closing, the buyer finds a customer had cancelled before closing, which breaks your promise about revenue, and shows $15,000 of loss. The claim passes the $2,500 basket, so it's paid from escrow. At month 12 you receive the remaining $35,000. Your worst case on general promises is losing the full $50,000 escrow, not money you've already been paid.
Now say the buyer's draft asks for a 20% cap and 24 months' survival. Your worst case doubles to $100,000, and the extra $50,000 would come out of your own pocket, after the escrow, at any point over two years. That one change is worth negotiating.
Closing documents that come with the APA
The APA is the main contract, but closing usually involves several shorter documents:
- Bill of sale: transfers ownership of the business assets.
- Intellectual property assignment agreement: transfers code, trademarks and content.
- Domain name transfer agreement: sometimes separate, sometimes part of the IP assignment.
- Assignment and assumption agreement: moves customer and vendor contracts to the buyer.
- Disclosure schedules: your list of exceptions to the reps and warranties.
- Escrow agreement: sets when and how the held-back money is released.
- Transition services agreement: your handover terms, if they're not in the APA itself.
Templates: when they help and when they don't
Free asset purchase agreement templates and sample PDFs are useful for one thing: seeing the structure before your lawyer's draft arrives. They aren't a safe way to sell a software business. Most are written for businesses with equipment and inventory, and they miss the parts that matter in a SaaS or app sale: code ownership, store and payment accounts, customer data, prepaid revenue and limits on your indemnification. Use the checklist above to review whatever draft you receive, and have a lawyer who has done software deals draft or review it.
Asset purchase agreement FAQs
What does APA mean in business?
APA stands for asset purchase agreement: the contract that sells a business's assets, rather than the company itself, to a buyer. It's the most common contract in small SaaS and app sales.
Who drafts the asset purchase agreement, the buyer or the seller?
Usually the buyer's lawyer writes the first draft, and the seller's lawyer marks it up. The seller's job is to check the asset list, limit the promises and negotiate the escrow, cap and survival period.
Is a business purchase agreement the same as an asset purchase agreement?
Often, but not always. "Business purchase agreement" and "business sale agreement" are general names for the contract that sells a business. If the deal sells assets, it's an asset purchase agreement. If it sells shares, it's a stock purchase agreement.
Can I use a free template to sell my business?
A template helps you understand the structure, but it isn't safe on its own for a software business. Most templates miss code ownership, store and payment accounts, customer data and prepaid revenue.
How long does it take to negotiate an APA?
It depends on how prepared both sides are. A seller with clean financials, a complete asset list and disclosure schedules ready can move much faster than one who builds them after the first draft arrives.
Do I need a lawyer for an asset purchase agreement?
Yes. The APA decides how much of the price you keep and what you could owe after closing. A lawyer who has worked on software deals is worth it even on a small sale.
Next step: know your number, then list
The APA decides how much of your price you keep, but the price comes first. Get a value range in a couple of minutes with the estimator below, or read what your SaaS is worth for the full method.
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