Bill of Sale
The Bill of Sale is the document which evidences the seller’s transfer of the business and its assets to the buyer. Customarily, the seller executes and delivers the Bill of Sale to the buyer at closing, when the buyer pays something to the seller (the full purchase price, or the down payment if the seller is financing the sale). Often it is attached as an exhibit to the Purchase Agreement, reflecting even before closing what the buyer expects the seller to transfer upon closing.
Title to the business and its assets passes to the buyer when closing becomes effective. At that time, the buyer receives the right of ownership along with related rights and remedies. The Bill of Sale should state when the transfer becomes effective. When the transfer is effective, the risk of loss (see, G.L. c. 106 §2-327 and §2-509) regarding the business and its assets passes to the buyer and the buyer has an insurable interest in the business and the assets. G.L. c. 106 §2-501(2).
The Purchase Agreement will have identified what the seller sold and what the buyer purchased (the business itself and the specific assets). The Bill of Sale should list, or reference an attached exhibit listing, the specific assets which the buyer purchased. This list is frequently attached to the financing statement filed to evidence the security interests when the buyer has financed the business purchase.
As important, by identifying what the seller has sold and what has been transferred to the buyer, the Bill of Sale, by implication, excludes business assets and liabilities which the buyer did not receive or assume.
As a document separate from the much more lengthy Purchase Agreement, the Bill of Sale is a useful document for the buyer to provide to third persons as evidence of the buyer’s ownership of the business and the assets. For example, the business utilities will be switched into the buyer’s name at closing and the buyer can provide this document to the utility companies without having to provide the full Purchase Agreement which covers many matters, such as the purchase price and payment terms, which are of no concern to the utility companies.
Special kinds of title transfer documents are required for certain business assets. If real property is sold, then a form of deed conveys title. Certificates of title are used when transferring ownership of motor vehicles. G.L. c. 90D. Transfer of intangible business assets, such as trademarks and patents, requires further kinds of transfer documentation recorded at the United States Patent and Trademark Office.