Some business buyers buy a business on their own. That is fine, considering the availability of legal business forms and templates. Others, like you, are wiser and more cautious. You want to lower your risk by hiring professionals, which could include a business lawyer, an accountant, a business broker and a property appraiser. They each have a specific role in the business for sale transaction. They supply you with pertinent facts upon which you base your decision on buying a business. Your team must work well together in a timely manner. Below are some tips on how to choose the right lawyer.
What Should You Look for in a Business Lawyer?
Remember that you are the boss. You are hiring professionals to ensure that you are making a smart purchase. They should protect your interests.
1. Referral. Ask your business broker, accountant, banker, family, other business owners, or friends for names of business transaction or corporate lawyers. Contact the state bar association or other lawyers to know more about these referrals. Check the internet, local newspaper archives and other publications. What do people say about them? Are they skilled and trustworthy?
2. Interview. Be polite yet make your terms clear. Here are key deciding factors to help you evaluate if you have found the right lawyer for you.
a. Experience. Look for a lawyer who handles business transactions with experience in buying a business. He or she should understand the industry you want to buy into. Does the lawyer represent similar businesses? Is he an expert in structuring business organizations?
b. Conflict of Interest. You do not want to hire a lawyer who represents the seller or your potential business competitors.
c. Attention. The lawyer should give you his or her full attention during the interview. He or she should be calm, and not be preoccupied or distracted.
d. Articulate. A corporate lawyer should be able to explain the risks you are facing and how to avoid them. He or she should use simple, understandable language; and be patient when walking you through legal issues.
e. References. Ask for references and call them. Were they satisfied with the services of the attorney? Did he or she meet deadlines? Was the lawyer patient in answering their concerns?
f. Malpractice Suits. Ask if the lawyer is facing any malpractice suits.
g. Comfort Level. Will you be comfortable working with this lawyer? Can you make demands? How were you are treated during the meeting?
3. Acceptable Rate. Clearly define the services you require of the lawyer. You can save legal fees if you can narrow down the scope of the tasks. For example, business brokers usually have a Letter of Intent template. You can use this and just ask the lawyer to revise and review it, instead of asking him or her to draft a new one for you. Ask the lawyer for a list of tasks in a business transaction. Whatever is on this list that you can do, do it. Negotiate the fee.
When Do You Need a Business Lawyer?
You need the services of a corporate lawyer in the following instances when you buy a business.
1. Letter of Intent. Once you decide to put in an offer, submit a LOI to the seller. Although this document is non-binding, you want a lawyer to look at it.
2. Due Diligence. The attorney reviews all contracts of the business – leasehold, assets, employees, suppliers, and other third party agreements. He or she secures approval of the transfer of these contracts to you. He or she also makes background checks on intangible assets like copyrights, patents, trademarks, etc. to make sure that there are no problems with the transfer of ownership. The lawyer verifies if there are loans, liabilities, claims, lawsuits against the company or liens against the assets of the company. He or she checks if the seller has the legal right to sell the business or its assets.
3. Financing. The lawyer sees to it that you comply with all legal requirements.
4. Purchase Contract. Lawyers of both sides (buyer and seller) put into legal format the agreed terms, including the type of sale (asset or stock).
5. Closing. The lawyers make sure the parties sign all the documents and there is the exchange of money, titles, etc. A non-compete agreement and promissory note on the financing of the company may also be part of the closing of the deal. Lawyers should accomplish your goal and not create animosity between you and the seller. Maintaining a relationship with the seller is important. You can call on them for advice when you encounter problems in the business. Are you ready to hire a lawyer to help you buy a business?