If you intend to purchase the assets of a business, there is a crucial business issue that is unrelated to any legal matter in the contract, the outcome of which could result in savings or loss to you of hundreds, thousands or millions of dollars, depending on the size of the deal. This part of the contract is known as the purchase price allocation. Depending upon which assets the purchase price is allocated to, the tax results can be drastically different to you. In general, as purchaser, you want as much of the purchase price allocated to assets that you can depreciate or amortize sooner rather than later. This will result in increased tax savings for you earlier. Those assets include accounts receivables, inventory and furniture, fixtures and equipment. On the other hand, the portion of the purchase price allocated to items like goodwill and covenants not to compete will be deducted over a much longer period of time, thereby delaying the tax benefits to you. Of course, the decision as to how the purchase price is allocated is not only the purchaser’s decision, but typically must also be agreed to by the seller. This leads to an important negotiation in the purchase agreement. The bottom line is that you must be aware of the significant consequences of allocating the purchase price to different assets and take that into account in the overall negotiation of the business purchase.