Funeral home APA key-terms checklist

Price mechanics

• Same formula as the LOI. Base price, preneed adjustment, working capital treatment. If a new deduction appears in the draft, ask where it came from before discussing anything else.
• Working capital defined by line item. Receivables, insurance assignments, merchandise, prepaid items, and cash-advance balances, each named. Our guide to working capital at closing shows the usual split.
• Post-closing true-up with a deadline. The buyer delivers a final statement within a set number of days; the seller gets a review window; an independent accountant settles anything left. Open-ended true-ups stay open.
• Prorations. Property tax, utilities, prepaid advertising, and license fees divided as of the closing date.
• SBA-specific language, if the buyer borrows. SBA SOP 50 10 8.1 prohibits seller earnouts. It treats a working capital true-up as a remedy for missing working capital rather than a rebate, so the buyer may keep that cash in the business. A rebate from the seller, by contrast, must pay down the loan.
• Escrow release terms. Amount, holder, release dates, and joint written instructions. Ask that undisputed funds be released on schedule even while one claim is pending.

Assets, liabilities, and open business

• Digital assets. Main phone numbers, domain, website, social accounts, review listings, and the case management data. Whoever controls the phone number controls the next call.
• Records. Case files and cremation authorizations transfer with custody duties the buyer must follow. Name who keeps which originals.
• Open cases at closing. For families in arrangement on closing day, say who completes the service, who bills, and who keeps the revenue.
• Assumed liabilities, narrowly. Only the contracts and obligations listed, typically the preneed register and named supplier agreements.
• Excluded liabilities, broadly. Pre-closing taxes, wage claims, regulatory penalties, and claims arising from services performed before closing stay with the seller.

Preneed transfer

• Certified register as a dated exhibit. Every open contract, its funding instrument, and whether it is guaranteed. It defines what the buyer is promising to perform.
• Consents as conditions. Trustee acceptance and insurer servicing changes on the list of conditions, not on a to-do list. State rules on transferring trust funds vary; your attorney should confirm the filings and their order.
• Who mails family notices, and by when. Some states require notices after an ownership change. Assign the task and the deadline to one party.
• Specific indemnity for missing contracts. A contract a family produces later, not on the register, is the seller’s cost. Give this indemnity its own survival period and keep it outside the general cap.

Representations and indemnity

• Knowledge qualifiers. Representations about matters you cannot control, such as a prior owner’s environmental history, should be limited to your actual knowledge.
• Disclosure schedules. List every known exception: an open board complaint, a late trust deposit, a failed inspection. A disclosed item generally cannot become an indemnity claim later.
• Survival periods by category. General, fundamental, tax, and preneed representations each get their own period, written as a date.
• Cap and basket. Expressed as percentages of price, with carve-outs kept short. Ask what each carve-out is for.
• Exclusive remedy. Post-closing claims run through the indemnity article only, so a lawsuit cannot reach past the cap.

Side agreements and tax

• Consulting or employment agreement. Duties, hours, pay, and term. In an SBA initial acquisition the seller may stay only as a consultant, for no more than 24 months in total, including extensions.
• Non-compete. Radius, term, and covered activities. See our definition of the funeral home non-compete; a buyer amortizes amounts allocated to it over 15 years under 26 U.S.C. § 197.
• Allocation schedule binding both sides. The Form 8594 instructions require both parties to file and to report the maximum consideration under any non-compete, employment, or similar agreement with the seller. Mismatched filings invite questions.
• Seller note and the installment method. IRS Publication 537 says inventory gain cannot be reported on the installment method and depreciation recapture is reported in the year of sale. Caskets, urns, and vehicles can create tax before the note pays.

Conditions and closing deliverables

• Licenses and the director in charge. The buyer’s establishment and crematory licenses, or the state’s acknowledgment of the change, plus a named funeral director in charge. A firm cannot open the next morning without them.
• Financing and third-party reports. Loan funding, the lender’s Phase I and appraisal, and any landlord or trustee consent. Name a date after which either side may walk away.
• Bring-down certificate. The seller confirms the representations are still true at closing and lists anything that changed since signing, such as a new complaint or a large preneed cancellation.
• Payoffs and lien releases. Every lender and equipment lessor paid from proceeds, with UCC terminations ready to file.
• Keys, codes, and logins. Building and vehicle keys, alarm codes, and administrator access to phones, website, software, and bank-linked services, delivered on the day rather than “within a week.”