SPA template — the 18-section structure designed for internal perpetuation.

Where the APA cherry-picks assets, the SPA transfers ownership entire. For external transactions, the APA's liability shield drives ~90–95% prevalence. For internal transactions — minority shareholder exits, gradual successions — the SPA's simplicity and entity continuity drive its use almost universally.

§ 01 · The 18-section structureHow the SPA is organized.

The internal SPA is shorter than the external APA. Eighteen sections instead of sixteen articles, no asset schedules, no income cutoff rules, no carrier-consent contingencies.

Sections 1–4 — Foundation. Fact Recitals (parties, share ownership, intent). Purchase and Sale of Shares (Buyer purchases all right, title, interest). Seller's Representations and Warranties (shares free and clear; authority to transfer). Closing (simultaneous with execution).

Section 5 — Indemnity. Bilateral. Seller indemnifies Buyer and Company for breach of any obligation or representation. Buyer indemnifies Seller for breach of any buyer obligation. Both include attorneys' fees coverage.

Section 6 — Additional Provisions. The operational substance. Transition Period (seller's last day of employment; cooperation through specified date). Covenant Not to Compete (typically 5 years, defined geography, P&C scope). Covenant Not to Solicit (clients and employees during preceding 1-year period). Proprietary Information (all files, client lists, records remain Company property). Notifying Third Parties (Buyer's right to notify subsequent employers of the restrictive covenant).

Sections 7–9. Non-Disparagement (mutual). Release (mutual; covers Seller's involvement as shareholder, officer, director, employee, creditor). Representation by Counsel.

Sections 10–18 — Standard provisions. Full Understanding, Amendment, Attorneys' Fees, Successors and Assigns, Construction, Headings, Further Acts, Entire Agreement, Counterparts. Exhibit A attaches the Promissory Note.

§ 02 · Simultaneous sign-and-closeThe distinguishing feature.

Section 4 specifies that execution and closing occur simultaneously. This differs sharply from the external APA's 30–90 day signing-to-closing gap, during which conditions precedent must be satisfied (carrier consent, regulatory approval, etc.).

The reason: in internal transactions, both parties already know the business intimately. There is no due-diligence gap, no carrier-consent risk (the entity continues intact), and no regulatory uncertainty. The conditions precedent that drive APA timing gaps are unnecessary. The transaction is effectively done in one meeting: sign the Agreement, deliver the share certificate, hand over the downpayment check and Promissory Note.

§ 03 · Promissory Note financingThe mechanics of internal seller financing.

Internal SPAs almost universally use seller financing. The buying shareholder rarely has cash to purchase shares outright, so the selling shareholder carries the note. Structure: downpayment at closing (cash or certified funds) plus a Promissory Note for the balance specifying principal, interest rate (AFR-compliant), payment schedule, and default provisions.

Security: unlike external APAs (where UCC-1 liens secure the buyer's note against agency assets), internal SPAs rely on the continuing operation of the Company itself as implicit security, plus the non-compete's reinforcing role. The selling shareholder's recourse is through the Note's default provisions and any personal guarantees.

The non-compete interaction matters here. The seller's covenant protects the buyer's ability to service the book and generate the cash flow that funds the Note. A seller who competes erodes the very revenue stream that pays them.

§ 04 · The C-Corp double-taxation caseWhy SPA matters for C-Corps specifically.

For C-Corporation agencies, the SPA's primary advantage over the APA is the avoidance of double taxation. In an asset sale by a C-Corp, the corporation recognizes gain on the assets sold (21% federal corporate tax), and when the proceeds are distributed to shareholders, they pay individual capital gains (~20%). Combined effective rate: 37–40%.

In a stock sale, shareholders sell their stock directly. One level of taxation — capital gains (~20%). On a $5M deal, the difference between one-level and two-level taxation is $850K–$1M in additional taxes. C-Corp owners strongly prefer stock sales for this reason.

§ 05 · QSBS and Section 1202The narrow but powerful exclusion.

Section 1202 of the Internal Revenue Code provides a potential 0% federal capital gains tax on the sale of Qualified Small Business Stock (QSBS). It applies only to stock sales, not asset sales.

Eligibility requirements are narrow. Stock must be in a C-Corporation. Corporation's gross assets must not exceed $50M at any time. Stock must have been held for at least 5 years. Stock must have been acquired at original issuance (not purchased from another shareholder, with limited exceptions). At least 80% of corporate assets must be used in active trade or business.

The exclusion is capped at the greater of $10M or 10× the adjusted basis. Many insurance agencies fail one or more requirements (especially the original-issuance requirement for later-stage shareholders). A tax-specialist CPA must perform a QSBS eligibility analysis before structuring a deal around this benefit.

§ 06 · The mutual releaseThe clean-break provision.

Section 8 includes a comprehensive mutual release — both parties release each other from all claims arising out of the Seller's involvement with the Company. Scope: claims arising from Seller's role as shareholder, officer, director, employee, creditor, or otherwise. Carve-out: claims arising under the Agreement itself remain enforceable (the seller can still enforce the Note despite the general release).

The strategic importance for internal perpetuation: selling and buying shareholders have a long shared history. The mutual release prevents either party from later asserting historical claims that could poison the post-closing relationship.

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