If you own your own business and are hoping to retire soon, or if you just want to trade in the roller coaster of entrepreneurship for the stability and security of a W-2 job, you may be scouting around for a prospective buyer. While enlisting an attorney in this process can sometimes seem like a needless expense, especially if you're hoping to sell your business to a close friend or family member, failing to dot all your I's and cross your T's can come back to bite you later.
This article will discuss several of the reasons why it's crucial to have an attorney involved in the sale of your business.
Avoiding Claims of Non-Disclosure
When a business is sold, the seller must often make certain representations to the purchaser, including an appraisal of the value of assets to be sold, a certification that client lists are accurate and up-to-date, and a promise that the business's books accurately reflect its income and expenses. And while the purchaser is usually free to get his or her own appraisals and have his or her own experts analyze the business's financials, not all will do so. Some may rely only on the seller's representations before signing a purchase agreement.
This reliance can put you in legal hot water if the purchaser later claims that you misrepresented one or more key facts or failed to disclose certain pertinent information. For example, if you recently learned that the property on which the business is located was subject to an environmental remediation action (thereby diluting the value of the land), yet failed to disclose this at purchase, you could be required to pay damages or even cover the cost of this remediation yourself. Having legal representation throughout the process can protect you from later non-disclosure claims.
Avoiding Claims of Fraud
Just as disgruntled buyers may later levy claims of non-disclosure, they may also claim that you, the seller, engaged in outright fraud. This fraud can be related to anything from your business's financial statements to a promise not to compete with the business after you've sold it. Having an attorney draft your sale and purchase agreements can ensure that any purchaser hoping to levy a fraud claim against you will have a long uphill battle.
Protecting Your Business Interests
Many business sales include the value of one of the most intangible assets: community goodwill. If you're selling your business's name, along with the business itself, you still retain an interest in ensuring that the new owners continue to serve the community just as you have. A business transaction law attorney can include language in the purchase agreement that will protect your good name, both now and in the future.