Indemnification
Your contractual promise to make the buyer whole if something you said about the business turns out to be wrong.
Indemnification is the legal mechanism in a purchase agreement that says: if the seller's representations about the business turn out to be false, and the buyer suffers a financial loss as a result, the seller has to pay the buyer back. If you said your financials were accurate and the buyer later discovers a $200K accounting error, you indemnify them for the $200K. If you said no lawsuits were pending and a customer sues 60 days after closing over something that happened on your watch, you indemnify them for the legal costs and any settlement. Indemnification is what makes the seller's representations and warranties legally meaningful — without it, the seller's promises in the purchase agreement would be just words.
The terms in your indemnification structure — the cap, the basket, the survival period — are often more important than the headline price. They determine what you're still on the hook for after the check clears.
Indemnification is the buyer's primary legal protection against everything they can't catch in diligence.
Find out what a buyer would see in your business — before you talk to one.
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