Earn-out agreement
Terms that make part of a business's price depend on future performance, with measurement and dispute rules.
What is included
- Reviews or drafts the letter of intent or term sheet
- Carries out legal due diligence on the business, its contracts, leases and records
- Drafts and negotiates the purchase agreement and closing documents
- Deals with the transfer of contracts, leases, permits and employees
- Coordinates the closing, the payment and the steps after closing
What is not included
- Government filing, search and registration fees and other disbursements
- Tax, accounting or valuation advice, unless the lawyer agrees to provide it
- Disputes or litigation that arise later
- Work by NEO Legal Services: NEO is a paralegal firm and only makes the referral
Who this service is for
- Buyers of a small or mid-sized business
- Owners selling or transferring a business
- Family businesses passing to the next generation
Information to have ready
- 1The letter of intent or offer, if any
- 2Financial statements and tax returns of the business
- 3Key contracts, leases, permits and employee information
- 4Corporate records and the minute book
- 5Contact details for the other side's lawyer and your accountant
How a referral works
- 1Tell us in a few words what the matter is about, and who else is involved, so we can check for a conflict of interest.
- 2We recommend an Ontario lawyer for your matter, and at least one other you could choose instead.
- 3The lawyer runs their own conflict check, confirms the scope and quotes the fee, normally in a written retainer agreement.
- 4You pay the lawyer's fee to the lawyer. Any referral fee comes out of it, is disclosed to you in writing, and never increases what you pay.
NEO Legal Services Professional Corporation is a licensed paralegal firm, not a law firm. Every step of a referral, and your rights
Frequently asked questions
What does the lawyer charge?
A typical Ontario fee for this service is $2,500–$8,000, plus HST. The lawyer quotes the actual fee before any work starts. You pay the lawyer directly; the referral itself costs you nothing.
Should I buy shares or assets?
It depends on taxes, liabilities and contracts. Sellers often prefer a share sale and buyers often prefer an asset purchase, so the lawyer and your accountant can explain the trade-offs for your deal.
What is due diligence?
It is the buyer's investigation of the business before closing, such as its contracts, leases, debts, permits, employees and legal problems. What is found often shapes the price and the terms of the agreement.
General information only, not legal advice. NEO Legal Services Professional Corporation is a licensed paralegal firm regulated by the Law Society of Ontario.
Important limitations
- No particular commercial result can be guaranteed
- Government approvals and third-party consents are outside the lawyer's control
- The work is limited to the scope the lawyer confirms in writing
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