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

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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 that s their main job; but you need to know that the seller s 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 seller s 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.

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.

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.

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.

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.

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.

BizBen Blog Contributer Buying a Business

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