Legal Paperwork Timeline in the Sale of Your Insurance Agency

As a rule, we advise sellers to begin organizing and completing the legal paperwork required for the sale of their insurance agency as soon as possible. In the excited early days of the sale of your insurance agency, you may find it easy to lose sight of this less appealing task, but it is of the utmost importance.

We have found that delaying the completion of legal paperwork can, in the worst cases, lead to the dissolution of a sale. If either the seller or the buyer encounters a significant delay during the paperwork process, this may sully their opinion of the other party’s professionalism. New expectations or terms introduced without warning can also complicate or sever a sale in progress.

Let’s break down the legal paperwork you will be expected to complete before your agency’s sale can be finalized.

Letter of Intent

The letter of intent, or LOI, documents the sale as it has been described thus far. It will contain the buyer’s offer and may briefly cover the timelines or sale processes to which both parties have initially agreed.

Furthermore, a LOI commonly includes a nondisclosure agreement, a clause forbidding the seller from entertaining other offers while the sale is in process, and  non-compete expectations to be followed upon closing.

As a seller, you are not responsible for generating the LOI. However, you must review it with us promptly so that we can move forward with the sale as outlined within.

Purchase Agreement

Once you have approved the LOI, including you and the buyer agreeing on your required amendments, it is time to tackle the paperwork that will serve as the cornerstone of the sale: the Purchase Agreement, or PA. This is the contract you will both sign at closing. It is the fully fleshed out contract that builds upon what you agreed to on the LOI.

The PA will detail which assets the buyer will purchase, that they are offered without financial encumbrance, and clear payment terms. Whether you prefer to receive installments or a bulk payment at closing, your expectations will be legally binding hereafter.

Additionally, the PA may include tax details regarding the sale price, binding instructions re the seller’s employees’ job security, NDAs, excluded liabilities, Tail Insurance, and more.

The PA can be quite long and detailed, which is why both buyer’s and seller’s attorney will have the opportunity to review and amend the Purchase Agreement repeatedly before closing day.

Because it can take more than a month to conclude negotiations, we recommend that you work with us and your attorney to create the first version of the PA as soon as possible.

Are you ready to sell your agency within the next two years? If you answered yes, contact Springtree Group right away. We will help you prepare your agency for sale, find the best fully qualified offers, and complete the sale process (including handling the time consuming paperwork) promptly and accurately.