Do I Need a Solicitor When Selling My Business?
If you have ever sold a business, you will be well accustomed to the process. If you haven’t, however, keep reading. Selling a business is not simply a case of finding somebody who is interested, taking their money and handing over the keys… there’s a lot of due diligence involved, and the sale of a business is an established process which needs careful attention.
Naturally, therefore, consulting a solicitor is what you should be doing! Selling a business is not a straightforward process and there are many legal principles in operation, one of which places the onus on the buyer to investigate and ensure they are getting what they are paying for.
#1: How Can a Solicitor Help?
For the buyer of your business, it is a huge investment. As a seller, it is important that you are getting the highest possible value from it. The problem with a business is that they cannot be inspected and valued as simply as a car, for example, and much of the valuation process involves the auditing of information such as your premises, stock, equipment, and products. To make an offer, the buyer needs all this information to be collected, audited, and presented professionally.
This is a huge undertaking and it is not something which you should necessarily be doing yourself. Also, valuation can sometimes involve the disclosure of sensitive business secrets. Why would you, the seller, disclose this to a buyer when there is no guarantee they will make an offer?
All of this creates several potential problems and headaches when you are selling your business, and there are many ways a national commercial law firm such as Harper James Solicitors can help:
Protection of your assets and information
It’s very common for buyers and sellers to enter into a non-disclosure agreement during the sales process. An NDA covers and protects any business-related secrets or sensitive information and prevents the potential buyer from disclosing it to other parties or using it to their own commercial advantage. A solicitor can draft up a watertight NDA for you and take legal action should a potential buyer breach it.
Answering questions from a potential buyer
After entering into an NDA and disclosing all relevant information, the potential buyer will naturally have lots of questions which have a specialist financial and legal nature. You are not able to answer these questions… at least not properly! Answers to these questions can very easily influence the offer which the buyer is willing to make, and if you answer any of their questions incorrectly or fail to cover all bases, you may find that the buyer drops out or makes an offer far below what you were anticipating.
There are lots of other ways a solicitor can help you out with the pre-sales process. What they can help with hugely depends on the specifics of your business and industry.
#2: What Role Does a Solicitor Play?
The sale of any business has huge potential consequences on both you – the seller – and the buyer. It is likely that your potential buyer will have their own solicitors working for them, and it is common for these two legal parties to handle the entire sales negotiations on your behalf.
When push comes to shove, however, the solicitors can only go so far with negotiations. In the end, it is down to you and the buyer to come to an agreement as to the final sale. In addition to this, it is down to you to instruct your solicitor and provide them with the scope to do their jobs. After all, your solicitor is acting on behalf of you and will only do what you instruct them to.
#3: Can I Go Without a Solicitor?
Yes, you can, however, it is not recommended in the slightest. Although you may think of yourself as one of the world’s greatest businesspeople, selling a commercial business has a lot of complications and caveats associated with it. If you fail to instruct a solicitor and try to go ahead without any legal advice, you may find that you end up making mistakes which can cost you huge amounts of money.
Also, don’t forget that the buyer will likely have their own instructed solicitor who will try their best to take advantage of your situation by getting the best possible deal for their client, the buyer. The cost of instructing a solicitor is so much less than the potential financial loss which can be suffered; it is a no-brainer and you should not proceed without one acting on your behalf.
When it’s time to sell up your business and move onto something new, instructing a commercial solicitors’ firm to handle the sale for you avoids potential legal problems and helps you get the best possible price.