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Why You Need A Lawyer To Sell


“Don’t sell without a trusty lawyer by your side.” You’ll hear this conventional advice doled out time and time again. At first, you might think that it’s a conspiracy propagated by lawyers and their friends to drum up business, but you’ll find that the ownership transfer process can be a real bear without their support.

 

“The worst time to sell a business is when the owner has no choice but to sell,” according to Harry Styron, a practicing attorney for over 20 years. Yet, once the decision has been made, business owners should look for a business lawyer who has developed “checklists and contracts to cover the issues common to these transactions.” Good lawyers will get most – if not all – of their business through referrals, so ask bankers, accountants, real estate brokers, appraisers or business brokers you know for referrals if you don’t have someone in particular in mind.

 

A good lawyer will make sure you are not “left holding the bag” if the buyer defaults. Sellers who rush into the sale will find that they’re inadvertently assuming more risk. Most of the time, lawyers will advise owners to avoid financing any part of the business. Yet, sellers are concerned that this could lower the sale price or scare off potential buyers. A lawyer can be a valuable asset during the negotiation process.  

 

Lawyers are extremely organized, so they can really help you get all the legal paperwork you need to complete the sale. These documents might include: Non-Disclosure Confidentiality Agreements, Personal Financial Statement Form, Offer-To-Purchase Agreement, Financial Statements (2-3 years), Statement of Seller Discretionary Earnings, Statement of Financial Ratios and Trends, Accounts Payable and Accounts Receivables, Inventory List with Values, List of Fixtures/Furnishings/Equipment, Asset Depreciation Schedule, Supplier and Distributor Contracts, Client List, Employment Agreements, List of Opportunities with Profit Projections, Business Formation Documents, C-Tax Returns (2-3 years), Leases, Business Licenses, Professional Certificates, Insurance Documents, Patent/Trademark Information, Outstanding Loan Agreements, Lien Descriptions, Business and Marketing Plan, and Business Procedures Manual.

 

Lawyers will also make sure you don’t make any terrible legal mistakes during the transfer. Some people fail to consider the tax implications or do not pre-qualify all buyers. You don’t want your business to fall into the wrong hands. Financial background forms and criminal background checks are important parts of the process that legal counsel will not let you overlook.

 

Some sellers may misrepresent their businesses to make it look good to prospective buyers. Yet, certain exaggerations, distortions or interpretations can not only send up red flags to buyers, but can also be breaking the law in some form or another. Attorneys will make sure that all your marketing materials are accurate and in compliance with the law.

 

Lastly, you want a lawyer to bind all parties to a non-disclosure agreement. If the details leak out about the impending sale before you’ve gone public with the information, then it could cause internal trouble. Employees may begin looking for a new job. Customers may begin defecting to your competitors. To have as smooth a transition as possible, you need your sales dealings to take place behind closed doors. Your friend, the lawyer, will make sure you have legal recourse should negotiations go awry.  

 

 

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Resources:
New York Times: How A Lawyer Can Help You Sell Your Business
INC: Selling Your Business? Get Your Documents In Order


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