How to Read a Purchase Agreement Without Nodding Off

If you’re buying or selling an accounting firm, you’re about to meet your new best frenemy: the purchase agreement. It’s long, it’s legal, and it might be the most important document in your entire deal. Sarah has reviewed hundreds of these, and while no two are exactly the same, most asset purchase agreements (APAs) follow a common structure. If you understand the backbone of the document, you’ll be less likely to stumble into costly surprises later. Let’s break it down, section by section. 

What Are You Actually Buying?

Pro Tip: Watch for how exclusions are structured.  

This is where the good stuff lives:  

• Purchase price (the number everyone cares about). 
• Assets included and assets excluded. 
• How the payment is structured; cash, promissory note, or something in between. 
• Allocation of the purchase price, which carries real tax consequences.

Pro Tip: Watch how exclusions are structured. A typical legal trick: “Buyer gets everything unless excluded” vs. “Buyer only gets what is specifically included.” The first is better for buyers. Sellers tend to prefer the second. Most agreements land somewhere in between.  

The Buyer’s Promises

This section is usually short and to the point. It’s where the buyer confirms things like: 

• They’re not currently in a lawsuit. 
• They actually have the authority to close the deal. 
• They’re financially capable of following through.

Nothing earth-shattering here, but still worth reading carefully.  

Representations & Warranties  

This is the longest, densest section; and for good reason. It’s where each party makes specific promises about the state of the business. Think: 

• “Our financials are accurate.” 
• “We own the assets we’re selling.” 
• “We’re not in the middle of a lawsuit… that we forgot to mention.”

Even if these seem boilerplate, they matter. Why? Because if any of them turn out to be false, you may have a breach of contract claim. Sarah has seen over 70% of failed small business deals tie back to problems in this section; often undisclosed litigation or employment issues. 

Bonus: These sections also act as a helpful forcing mechanism. Sellers often remember things they “forgot” during diligence once they’re asked to sign under penalty of perjury. It happens more than you’d think.  

Covenants: After-Closing Obligations

Here’s where the agreement sets rules for what happens after the ink dries: 

• Non-compete clauses (how long, how far, and what services are restricted). 
• Non-solicits (restrictions on poaching clients or employees). 
• Confidentiality obligations. 
• Further assurances (promises to sign additional documents if needed).

CPA-Specific Tip: Your non-compete needs to actually protect the client list you're buying. A 20-mile radius isn’t much use if the seller is doing tax work online for clients across the country. 

Indemnification  

This section answers one key question: who pays if something goes wrong? It covers:  

• If a third party sues post-close, who’s responsible? 
• What happens if someone breaches the agreement?

Example: A client sues for a mistake that happened before closing. Even if they sue both buyer and seller (which is common), indemnification clauses tell you who pays.  

Bonus features you’ll see here: 

• Caps: Limits on how much a seller can be on the hook for 
• Baskets: Minimum claim thresholds before indemnification kicks in 
• Survival periods: How long the reps and warranties last after closing

The “Miscellaneous” Section

It sounds skippable but it isn’t. The boilerplate is where lawyers hide weird surprises. Read it anyway. Look for: 

• Integration clauses (the contract overrides all prior conversations) 
• Assignment clauses (can you assign this agreement to someone else later?) 
• How amendments are handled 
• Who has to sign; and in what capacity

Pro Tip: Make sure the seller signs personally if their company is disappearing post-sale. Otherwise, you’re stuck chasing a dissolved LLC when something goes sideways. 

How and When the Deal Closes

This is the “closing mechanics” section. If you’re doing a bifurcated sign-and-close (signing now, closing later), this part matters big time. You need clear conditions for what must happen before closing, because no one wants a vague “we’ll figure it out later” situation when money is on the line. 

Final Thought: Read It Like a Manual, Not a Novel

You probably don’t pull out the user manual for your fridge until it breaks. Don’t treat your purchase agreement the same way. Read it now. Understand it now. Ask the annoying questions now; before you’ve wired the money and inherited a hornet’s nest of legal liabilities. Need help understanding your own deal documents? We’ve got templates, checklists, and real-world guidance inside Deal Academy, all built for buyers and sellers of CPA firms.