LegalOperations
Transition Services Agreement (TSA)
Also known as: TSA, transition services contract, post-close services agreement
A post-close contract under which the seller keeps providing certain services — IT, accounting, customer handoffs, systems support — to the buyer for a defined period. Routinely under-scoped and under-paid, it can keep a founder working long after they thought they were out.
WHY IT MATTERS
When a buyer acquires a business that still leans on the founder, it rarely has everything it needs to run on day one — the seller's systems, the bookkeeping, the key customer relationships, the institutional knowledge. A TSA bridges that gap: the seller agrees to provide named services for a set window, usually 3 to 12 months, at an agreed fee.
The trap is scope. TSAs are often drafted loosely — "reasonable assistance," "as needed" — which hands the buyer an open-ended claim on the founder's time. Hours balloon, the fee doesn't, and the founder ends up effectively re-employed by the company they just sold, unpaid for the overage. Tight TSAs specify exactly which services, for how long, at what hourly or monthly rate, with a hard end date and a cap on hours. The cleaner the underlying business runs without the founder, the shorter and cheaper the TSA — another reason owner-independence before exit pays off directly.