Plain-English guide. Not legal advice. A lawyer should review anything you sign.
Seller notes and earnouts on a business
Part of the price depends on how the business does after you buy it.
A seller note is a promise to pay the seller over time. An earnout is an extra payment if revenue or profit hits a target. They are often used together when a bank will not lend the whole price.
The fight, later, is usually about the definition. Whose accounting? What if the buyer changes the menu or the hours? Write the formula down.
The note is often behind the bank, so the seller gets paid only if the senior loan allows it. This page is not tax advice. A CPA should look at the structure.