Why the Purchase Agreement Matters in an Accounting Practice Sale
When you’re buying or selling an accounting practice, the purchase agreement is the most important document in the entire transaction. It functions like the operating manual for your newly acquired firm: it explains what you’re buying, what you’re not buying, how the deal will close, and what happens if something goes wrong.
It’s not thrilling reading, but misunderstandings here are costly. Before anyone signs, both buyers and sellers should clearly understand what each section means—and how it affects the future of the firm.
Below is a practical breakdown of the seven core parts of a purchase agreement for accounting practice sales, written in plain English.
What a Standard Purchase Agreement Includes
Article One: Purchase Price and Assets Included
Article One defines the financial and physical components of the deal, including:
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The purchase price
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Assets included in the sale
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Assets excluded from the sale
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Payment structure (cash, seller note, earn-out, retention-based price adjustment)
You’ll also see disclosure schedules, which list exceptions. If the document says the buyer is acquiring everything unless listed otherwise, then the schedule effectively becomes the true asset list.
Buyers typically want a broad list of assets included.
Sellers often want clearer limits.
This article sets up the entire transaction—clarity here is essential.
Article Two: Closing Mechanics and Timing
Many accounting firm transitions use a bifurcated closing: sign now, close later.
This section outlines:
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What happens on the signing date
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Conditions required before closing
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Documents each party must deliver
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What happens if closing is delayed
This part ensures the agreement works both today and at final closing. If closing day feels anticlimactic, that usually means it was drafted correctly.
Article Three: Seller Representations and Warranties
Seller representations and warranties (often called reps and warranties) formally state that:
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The seller legally owns the assets being sold
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Financial statements are accurate
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Client lists belong to the seller
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No undisclosed lawsuits or claims exist
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All liabilities have been disclosed
This protects buyers. If any statement is false, the buyer may have a valid breach of contract claim.
It also forces sellers to disclose anything unusual: pending disputes, threatened lawsuits, wage claims, or client issues. Problems are better disclosed here than discovered after closing.
Article Four: Buyer Representations and Warranties
Buyer reps and warranties are usually much shorter and typically confirm:
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The buyer has the legal capacity to enter the agreement
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The buyer has the financial ability to complete the purchase
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The buyer has disclosed any pending legal matters
Simple—but important.
Article Five: Covenants and Post-Closing Obligations
Covenants are forward-looking promises. For accounting practice sales, these typically include:
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Non-compete clauses
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Non-solicitation of clients and staff
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Non-disparagement
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Transition participation requirements
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Agreements to assist with additional documents or information (“further assurances”)
Buyers: Make sure the non-compete clause covers the clients and geography you’re acquiring.
Sellers: Ensure the restrictions are reasonable so you are not barred from the industry entirely.
This section sets expectations for behavior long after the deal closes.
Article Six: Indemnification (Who Pays if Something Goes Wrong)
Indemnification determines who bears responsibility if a pre-closing issue arises after closing—such as a lawsuit, tax claim, billing error, or employment issue.
This article often addresses:
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Survival periods (how long reps remain enforceable)
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Caps (limits on seller liability)
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Baskets (minimum thresholds before claims apply)
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Procedures for handling third-party claims
This is one of the most critical sections for buyers and heavily negotiated in most accounting practice acquisitions.
Article Seven: Boilerplate Legal Terms
This section contains the legal fine print—things like:
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Integration clauses
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Amendments
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Severability
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Assignment restrictions
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Governing law
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Dispute resolution
Although it looks generic, important details can hide here.
Also confirm the right people sign the agreement. Buyers want the individual seller—not just the seller’s entity—bound to the non-compete and other obligations.
How Buyers and Sellers Should Review a Purchase Agreement
Before signing, both parties should:
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Verify all assets and exclusions are clearly listed
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Confirm the payment structure matches the negotiated deal
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Understand the scope of the non-compete
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Review survival periods and liability caps
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Ensure disclosure schedules are accurate and complete
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Confirm any transition responsibilities are clearly outlined
The purchase agreement is not just a formality. It is the blueprint for the entire deal.
Frequently Asked Questions (FAQ)
1. What should be included in a purchase agreement for an accounting firm?
A complete agreement should outline the assets being purchased, price, payment terms, non-compete, seller warranties, buyer responsibilities, closing conditions, and indemnification clauses.
2. Do I need a lawyer to review an accounting practice purchase agreement?
Yes. Accounting firm sales involve specialized terms—non-competes, client transfer obligations, and liability issues—so professional review is highly recommended.
3. How long do representations and warranties last after closing?
Most survive for 12–24 months, though some (like ownership of assets) may survive longer.
4. What is a retention clause in a CPA firm purchase agreement?
A retention clause adjusts the purchase price based on how many clients successfully transition after closing.
5. What is indemnification in an accounting practice sale?
Indemnification determines who pays if a lawsuit, tax issue, or client-related claim arises after closing but relates to pre-closing events.
Need Help Reviewing a Purchase Agreement?
Whether you’re buying or selling an accounting practice, you don’t want surprises after closing. We help buyers and sellers understand their agreements, structure deals correctly, and avoid costly mistakes.