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Do I Need To Hire An Attorney When Buying A Business?

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Comments & Replies: 6     Views: 4490     Posted By: Peter Siegel MBA  Peter Siegel MBA: BizBen Founder, ProBuy/ProSell Program Director

Topics: Buying A Business, Legal Issues     Tags: buying a business, legal issues

In my opinion it is vital that an experienced business attorney be part of your professional team. They should review all legal documents. It is extremely important that you hire an attorney that is familiar not only with the business buying process but that also has the time available to all handle the paperwork that is involved with this process in a timely basis. You'll be happy to know that many business brokers have lists of attorneys who are familiar with the business buying process. An experienced attorney is vital in order to make sure that all of the details are handled properly.

However, you should keep in mind that many attorneys are not qualified to give actual business advice. Your attorney will be looking after your interests and thatís their main job; but you need to know that the sellerís interests also must be taken into consideration. If you end up in a situation where your attorney goes too far in trying to protect your interests as the buyer, it is possible that the sellerís attorney may instruct their client not to proceed with the transaction. The deal must be fair for all parties involved. Remember that the attorney works for you, and you must have a say in how everything is done.

Again, in my opinion it is absolutely vital that you have an experienced business attorney involved whenever there are contracts and complicated business transactions taking place. The purchase of a business is one of those situations. Do your due diligence and find the right business attorney with a good reputation and track record.

I do agree that it is wise to have an experienced attorney review the documents, especially complicated leases. However, I recently went through a nightmare with some sellers that hired their labor attorney, he didn't know anything about business transaction law and got the sellers hung up to the point they ruined their own deal. Ultimately, buyers and sellers should use the best resources available to them but not abandon common sense when making business decisions that will profoundly affect the success of the transaction.

No, you don't need to hire an attorney; but, you don't NEED to buy fire insurance either.

Approaching four decades as a licensed attorney (NJ), I can attest to how important it is for business buyers and business owners to have a competent, professional attorney who specializes in business transactions. That expertise and experience in business transactions is crucial. When I practiced law in New Jersey, that was my concentration; and, if someone came to me with a personal injury, or malpractice, or workers' comp case, I found them an expert attorney in those areas. Yes, attorney specialization matters a lot. The right attorney can help the buyer make the deal that's best for all concerned; the wrong attorney will break the deal - and charge a lot in the process.

So, shop around; ask the business broker, your banker, your insurance agent, for recommendations of lawyers with business transaction experience; interview a few different lawyers and have them tell you what types and sizes of deals they have handled. And, don't be impressed by the lawyer who has done the "big deal"; rather, find a lawyer who has handled a multitude of transactions that are most similar in size and scope to the one you are beginning.

Contributor: Business Broker: LA County Area

I would add, when selecting an attorney, the person's skills and legal background need to be weighed against one crucial factor -- how "business-friendly" is that lawyer. Many of us can point to horrible experiences where an attorney seems more interested in earning a fee, or keeping the transnational horse in the barn, rather than crossing the finish line to the benefit of all concerned. When making the attorney selection, pay tons of attention to his/her flexibility and willingness to get the deal done.

We've all heard the question: "Is this lawyer a 'deal-maker' or a 'deal-breaker'." In all the years I practiced law in New Jersey, specializing in business transactions, it was my assumption that the parties to a business deal wanted the deal to go through while eliminating or reasonably limiting the risks to both parties. In my experience, the truly effective attorney finds every way possible to accommodate the differences between the parties and makes the deal work, unless to do so would be unreasonably and disproportionately disadvantageous or dangerous to the client.

In short, it's easy to say: "It can't work." It's a lot harder to say: "Let's try another way to get the same result."

Find an attorney who is honest, smart, experienced ... and creative.

If a buyer asked me that question I'd say "you probably need to ask an attorney to answer that question for you!" just joking, but seriously, yes, I'd never dissuade anyone from seeking either legal advice or asking an accountant for advice, because if anything ever went to court I can imagine how bad it would look if I had told a client to not seek other qualified advice.

I've had lawyers become involved in transactions, and yes, sometimes they have been "deal killers" because they have sent back my California Association of Realtor forms (CAR) forms, such as purchase agreement, back to me, revised from their pen, which I won't allow. My CAR forms are drafted by attorneys from the state, and so they are valid contracts as they are written.

Unfortunately in selling a small business the documentation on the business is not 100% from the seller, and so if someone wanted to do, say a forensic audit of the business, it may be difficult because sometimes if not always there will be an element of cash involved in the sales, and so a buyer must do their due diligence, but also see in between the lines when making a thought out decision. Situations like these are when an attorney can tell a client not to do the deal, because their job is to eliminate risk from a situation, and when buying a business, there is always an element of risk involved.

  Helpful Resources To Assist In Selling And Buying California Businesses
Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Brad Steinberg, Broker - Laundromat Specialists

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Joe Sandbank, Esq. - Legal Services

I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

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