Selling a business is a huge undertaking and even small slip-ups can result in expensive delays or legal problems. Hiring a lawyer is a wise move but what kind of lawyer do you need to sell your business to make the most of the sale?
Whether it’s drafting contracts, protecting intellectual property or selling without the right legal counsel, you may be exposing yourself to risks.
Most seasoned lawyers know the risks and how to navigate them. An M&A attorney, for instance, can help smooth negotiations and draft binding agreements that protect your interests.
This guide will help you choose the right type of lawyer for your sale.
Key Takeaways
- Corporate attorneys — like mergers and acquisitions specialists or business transaction lawyers — facilitate negotiations, draft contracts and help you comply with state and federal regulations when selling.
- Intellectual property lawyers help protect the trademarks, patents and other assets your company owns in terms of ownership transfers and preventing disputes after the sale.
- Lawyers mitigate risks by conducting extensive DESK REVIEWS identified LiABILITIES through due diligence (compliance with taxes, WARRANTIES, NDAs, etc.) structuring sales of ASSETS.
- Referrals and testimonials from reliable clients, brokers or others in the field can provide you with a list of attorneys experienced in handling business transactions from simple stock reboots to complex business asset transfers.
- If the seller has the requisite knowledge, small sales probably do not require substantial legal representation; however, it is always recommended to consult a lawyer so that even minor agreements are devoid of mistakes.
The Role of a Lawyer When Selling Your Business
There are legal obligations involved in selling a business that can be difficult to handle on your own. A lawyer protects your interests by considering risks in contracts and agreements.
Challenges in Business Transactions
The legalities of business transactions can also be complex, exposing sellers to substantial financial risk. A lot of drafting and reviewing goes into preparing asset purchase agreements, stock sale documents, or non-disclosure agreements, as not remaining precise can lead to loopholes.
Badly constructed contracts can lead to disputes or baseless allegations from buyers. In M&As, particularly with private equity firms, planning is often limited in scope and without it, legal fees can rise exponentially as one issue arises after another.
Business sales in particular are subject to state and federal laws that dictate tax compliance as well as acceptable valuation methods. Attorneys help keep parties in compliance with these rules while protecting proprietary information such as trade secrets during the transaction process.
They administer multiple contractual commitments like warranties or indemnities linked to the transaction, shielding sellers from liability once they have closed a deal with buyers or investment bankers operating under market constraints.
Compliance With State And Federal Regulations
Attorneys also ensure contracts comply with state and federal laws in business acquisitions. They apply to regulations in industries, assisting owners in sidestepping transgressions that could hinder the sale.
For example, selling a franchise requires compliance with franchising disclosure laws, notably the Federal Trade Commission Rule. Failure to comply with such rules can result in penalties or canceled agreements.
Lawyers scrutinize the details of the transaction to ensure compliance through each stage. This entails assessing NDAs and warranties to find a legal balance while also mitigating risks associated with corporate governance laws or tax codes.
Neglecting to do so can lead to crippling financial losses or litigation after a sale. A good lawyer helps streamline this process to minimize expensive mistakes.
Choosing the proper kind of lawyer will also set you up to get the other essential items done right, such as due diligence and the security of intellectual property.
Minimizing legal risks
To prevent disputes, a well-defined Asset Purchase Agreement (APA) should be drafted. And include specifics such as pay dates, training commitments, and assets listed. Good documentation decreases the risk of speculative claims post-closing.
Particularly post-closing, structuring deals effectively makes sure that liabilities do not arise. M&A lawyers do due diligence to identify potential risks in M&A transactions or the business broker agreement while ensuring compliance with applicable laws.
This preemptively protects against legal fees associated with warranty or claims problems down the line.
Business Types of Lawyers for Selling a Business
Selling your business without adequate legal backing leads owners to risk lawsuits or undesired liability throughout the transfer process. Various layer types are responsible for specific perspectives of a trade sale. Which one you choose depends on the size, assets and complexity of your transaction.
Business lawyers
Business transaction lawyers can help you navigate the complexities of selling a business. These professionals are masters at drafting and revisiting key documents such as buy-sell agreements, making sure all terms represent your interests.
They also counseling on selecting a suitable sale structure that enhances the financial rewards of the sale while limiting any tax liabilities. For example, they can prescribe how to structure the deal, and whether the sale should be stock or asset sale based on the potential legal (or fiscal) ramifications in the future.
Transaction attorneys have a lot of experience with business sales, and they will be able to ensure that your business deal complies with both state and federal regulations. This mitigates the risks of any penalties and delays during the course of the process.
Their expertise with different industries means they’ll anticipate problems unique to your company’s industry — whether about licenses, permits or intellectual property issues.
Intellectual property lawyers
Intellectual property lawyers help protect a business’s intangible property, like trademarks, patents, trade secrets, and copyrights. During a sale, they ensure that ownership transfers properly while dealing with data privacy or intellectual property rights issues, which can be tricky.
For instance, they help verify that the seller is the legitimate owner of any branding or proprietary technologies, prior to finalizing the transaction.
These lawyers furthermore help comply with state and federal laws related to intellectual property laws. Their knowledge reduces the likelihood of legal problems related to disputes over ownership or misuse of protected assets after the sale of your business.
The right attorney in this area can protect future income connected to worthwhile innovations or even brand equity that may be nubbed into a sales agreement.
Mergers and acquisitions lawyers
Mergers and acquisitions (M&A) specialists guide business sales, mergers or purchases. They specialize in deal structuring and execution for both small and large businesses.
These lawyers have knowledge of modern M&A trends and are adept in dealing with complex transactions. They also negotiate terms, mitigate risks and make agreements that protect their client’s interest.
To demonstrate their ability, these lawyers must show they have experience with similar transactions. Such direct questions would be “What types of deals have you closed? or “How do you keep current with emerging market practices?” When answering, demonstrate your conviction by providing examples of successfully closed sales across a wider breadth of industries or company sizes.
For instance, an M&A lawyer may negotiate asset allocation to avoid post-sale conflict among parties.
These lawyers aim to smooth the negotiations with other parties, including business brokers or accountant, if not an actual part of a business brokerage or M&A firm to achieve fair market price expectations without complicating matters further.
That being said, M&A lawyers work with a full-stack team of brokers, accountants, bankers, and have a network of buyers and sellers. This means your business gets exposure to potential buyers faster and when selling your business, you have one M&A point person and they can expedite the sale smoothly.
Important Functions of a Lawyer in the Selling Process
A lawyer will help draft the terms and have you vested properly in the agreement, and they will protect your interests while following every leg of the process in accordance with the applicable law.
To Draft and Review Contracts
In business sales, lawyers spend much time carefully crafting contracts to minimize donkey behaviours and avoid misunderstandings that could lead to ugly litigation. They use precise legal language and cover all relevant details such as payment terms, ownership transfer information, liabilities etc.
Even when sellers fulfil their obligations, poorly drafted agreements can result in disputes or unfounded buyer claims. A properly drafted contract protects both the parties and ensures compliance with the applicable state and federal laws.
Reviewing contracts means looking for potential loopholes in the smallest details and holding all clauses to the seller’s best interests. Lawyers inspect warranties, indemnities, and liabilities to avoid miscommunications or opportunism.
For instance, selling a business typically has provisions over intellectual property rights or real estate elements of the sale. And attorneys also confirm that insurance premiums for any of the assets are covered in writing before the deal is done.
This process minimizes long-term risk for all parties of the transaction.
Conducting due diligence
You collect information from all parties and make sure everything about the sale of the business is transparent, in order to suppress any risks. Lawyers conduct due diligence on financial records, legal liabilities and existing contracts to discover potential risks.
They ensure adherence to federal and state regulations, as well as to confirm ownership of intellectual property, sidestepping future quarrels. Structuring a deal correctly increases legal agreements’ enforceability.
A lawyer assesses liabilities such as outstanding debts or pending litigation that might affect the value of the transaction. This gives both parties a layer of protection from unexpected complications, after the sale has gone through.
It is at this stage that it is important to clarify questions like how the resources will add value before serious negotiation contracts or IP work is done.
Protecting people’s intellectual property
Intellectual property (IP) is vital for the success of the sale of a business. Attorneys make certain that trademarks, patents, copyrights and trade secrets are distinctly addressed within the buy-sell agreement.
For example, they explore whether your intellectual property includes brand logos protected by federal trademark law or proprietary software depending on licensing terms. This ensures no argument over the transaction later.
Careful deal documents also protect against new owners abusing sensitive data. These experts evaluate risks pertaining to data privacy compliance and the intellectual assets applicable to your operation.
Failing to pay attention here could leave sellers vulnerable to financial forfeiture or claims after the sale.
Negotiating terms of the sale
Arrange terms to safeguard business owners by seeking assistance from legal professionals. They spot potential risks and negotiate agreements that mitigate legal exposure for sellers.
An experienced mergers and acquisitions (M&A) attorney will negotiate indemnity clauses, earn-out provisions, and more to ensure the seller’s interests are protected and the transaction complies with tax laws.
Their expertise can also help to mitigate complicated problems, such as liabilities or intellectual property disputes, before the deal is done.
During negotiations, experts also function in a strategic advisory role by evaluating offers and suggesting counterterms as appropriate. Their tax implications can explain why owners might want to consider different payment structures, including lump sums versus installments.
“An attorney that deals with transactions will create clear responsibilities between the buyer and the seller, without complicating terms for either party unnecessarily.”
How to Select the Right Lawyer When Selling Your Business
The right lawyer to choose for your business depends on your business needs and goals. Look for someone with a demonstrated track record managing business transfers that are in your best interests.
Talk to other business owners who have sold businesses recently. They can hold great recommendations for seasoned lawyers. One of the best ways to find trusted legal experts is through referrals from fellow entrepreneurs in your field.
Talk to a business broker too. Brokers often work with specialized attorneys who understand how business sales work. If you need to bring in a professional, find one with expertise in areas relevant to your sale process, such as intellectual property or estate planning.
This cooperation guarantees that you can manage intricate transactions in the correct manner since you will work with experts in the field.
Look into the lawyer’s experience and expertise
Check the attorney’s background to make sure of relevant experience in business transactions. Inquire about deals they have put together and closed, focusing particularly M&A trends.
You’re likely to be familiar with what your state regulations require when selling businesses, as well as what compliance is required to set it up for future sale. An intellectual property lawyer, for instance, can help establish trademarks or patents when closing sales.
But it goes beyond that, it is highly advised to interview potential attorneys to assess their understanding of the complex legal processes involved in your particular sale type. The questions they ask will be focused on what types of companies they’ve worked with or if they have dealt with similarly scaled deals.
Be sure to check client testimonials and records of success in previous cases.
Ask your business broker or M&A advisor for referrals
Business brokers tend to collaborate with attorneys through the course of sales. They should be able to recommend attorneys who are used to selling businesses, which means that you will be assured of dealing with someone who can handle things.
Working with a broker will link you with legal experts experienced with similar transactions; they can guide you in the right direction. Brokers also know what attorneys are great for drafting contracts, managing disputes and for industry-specific problems.
These tips can save time and were recommended to help avoid a situation of retaining an inexperienced attorney that makes things more complicated.
Check out client testimonials and track records
Client reviews offer extremely helpful information about a lawyer’s past performance. Words of praise often speak to how well attorneys address challenges, communicate and deliver results. Seek out detailed information about successful business sales or favorable legal outcomes.
A highly proficient background of years of experience and specific case successes indicate an attorney’s ability to navigate through the intricacies of the judicial system.
Evaluation of their previous work will reduce the risk in your transaction. An experienced lawyer will do their best in order to prevent any disputes that can complicate & delay the selling process.
Inquire what resources the firm has at its disposal and what distinct value they will add to each deal. This assessment helps you decide whether the person is sufficiently skilled to look out for your interests as you navigate the selling process.
When You Might Not Need a Lawyer
If your process has very limited legal steps, you may be able to navigate a simple business sale by yourself. There are cases where a trust broker or your own knowledge can guide you rather than a lawyer.
Small-scale business sales
It is a common misconception that small business sales require a lot of legalackground. Image: If you sell a $2,000 website, then paying an attorney with $3,000 may not be very useful.
Some savvy sellers with knowledge of the law create their own agreements using inexpensive online templates or existing tools.
It is cost-cutting measures like this that benefit small businesses with simple structures and few assets. A seller well-versed in contacts, or who knows state laws, may even skip hiring an attorney entirely.
So, read on to find out why you should hire a lawyer for bigger stays.
Knowledge of Legal Procedures
Veteran sellers with legal training may draft agreements themselves to save costs. These are the people who are able to work with contracts, state and federal regulations, and potential liabilities.
A person who’s knowledgeable about business law can spot potential terms that could lead to disputes down the line without consulting outside legal counsel, for instance.
This method is most effective for smaller-scale sales or lower risk transactions.” Even so, a lawyer can help ensure the sale abides by current laws. Information such as licensing transfer or intellectual property protection may still benefit from professional assistance, and even if one knows the steps themselves, specialized attorneys can save a great deal of stress.
Reasons to Hire a Lawyer When Selling Your Business
A lawyer makes sure your sale process is kept on the legal side and efficient. They flag potential risks early so future disputes don’t arise.
More confident and clear in their own skin
Never lose your sleep due to the legal ramifications of a poorly arranged contract. A well-crafted buy-sell agreement provides clarity of obligations and protection to both sides. A seasoned lawyer will break down processes clients may not be familiar with in order to alleviate concerns about complex transactions.
Lawyers explain state and federal regulations on sales of businesses. By preventing legal risks such as compliance issues or disputes over intellectual property rights, their involvement increases certainty.
With their guidance, sellers learn the ins and outs of every step.
Avoidance of legal disputes
Good lawyers reduce legal disputes by writing good contracts. These contracts define terms, minimizing buyer claims and misinterpretations. One of the primary benefits of hiring an attorney is that it helps ensure both parties are compliant with state and federal laws, thereby protecting each party from lawsuits during the transaction.
As a consequence, the lawyers in each party negotiate the terms of the sale such as that the seller is insulated from as much risk as possible. Legal safeguards in areas like intellectual property rights, tax and similar obligations keep sellers out of trouble.
This minimizes the scope for misunderstandings that could lead to more expensive disputes down the line.
Smooth transaction process
There must therefore be legal oversight of ownership transfers and liabilities to facilitate, and ensure, a smooth transaction process. A lawyer creates a standing contract with definitive terms to protect both parties.
They, for example, ensure that intellectual property rights go with the business sale. This helps prevent disputes and delays at closing.
Business transaction attorneys also work with brokers to further streamline processes when a business is sold. Their input can help avoid less-than-obvious obstacles such as undetected debt or regulatory problems.
They provide guidance through each step of the deal to help ensure compliance with federal laws, driving the process with transparency.
Verdict: An M&A Lawyer in a Business Brokerage Firm
Planning to sell your business requires cues from legalities and professional experts. A business transaction/M&A attorney can ensure that your interests are protected during the sale and because they have a network of buyers and sellers, expediting the sale becomes more streamlined.
They assist with drafting contracts, reviewing terms and mitigating risk. Opting for a competent lawyer means that each part of the process will be effective. Consider what you specifically need before choosing a professional to advise you.
How SellerForce Can Help You Sell Your Business Risk-Free
SellerForce is a full-stack business brokerage firm with its M&A lawyers, brokers, accountants, investment bankers, with over $2 billion in successful deals and over 20 years of experience. This gives us the confidence to offer a 100%-success-based business brokerage service with no upfront fees. This shows we are as motivated as you, the business owner. to sell at maximum valuation. Contact us today to make your business sale smooth, streamlined and quite profitable.
FAQs
1. Do you need a lawyer or broker when selling your business?
An attorney and a broker have distinct functions for your business sale. A broker concentrates on finding buyers and brokering deals, and a lawyer ensures that the legal details are correct, including contracts, trusts, and compliance. However, there are business transaction lawyers/M&A lawyers who are part of business brokerage firm, this means they offer you a full stack business brokerage service with one point person and facilitate the business sale from valuation, documentation, financial and legal paperwork,due diligence, all the way to the closing of the deal.
2. Can I sell my business with help from a real estate lawyer?
If your sale involves property transactions, a real estate lawyer might help. However, for issues like contracts or structuring trusts during the sale process, you may want a more specialized business attorney.
3. What legal work does a lawyer do when I sell my business?
A lawyer can write agreements, review buyer offers, take care of trust arrangements to facilitate the transfer of funds, and make sure that all documents are compliant with the laws that apply to businesses for sale.
