How to Prepare for Consultation for Buying and Selling a Business

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 How Can I Prepare for a Consultation for Buying or Selling a Business?

The decision to buy or sell a business is a matter that should be taken very seriously. For buyers, there is a huge risk that customers will not want to purchase products or services from new business owners or that a company is not as successful as it appears to be. Either way, the buyer could lose a lot of money purchasing a new business if they do not perform due diligence before signing the purchase and sale agreement.

On the other hand, sellers also take on a lot of risk when they are selling a business. A buyer could ruin the company’s established reputation or back out of a deal at the last second. They could also lose out on a lot of money they could have made if they had known more about how to make a profit when selling a business.

Therefore, the best way to ensure that a buyer or seller has a reduced amount of risk when entering into such a transaction is to ask a business lawyer in your area for help. In some instances, you may need to schedule a consultation meeting with a lawyer before hiring them.

For example, if you do not know any business lawyers or do not know anyone who can recommend one, then you will most likely want to meet with a lawyer before you officially hire them.

However, even if you are familiar with the business lawyer whom you hire, the lawyer may ask that you come in for a consultation meeting to see if they will have enough time to focus on your case and to determine if they practice the right kind of law to handle your matter properly. Thus, you will need to prepare for a consultation with a lawyer, regardless of whether you are buying or selling a business.

Some items you may want to consider before attending a consultation meeting include:

  • How much you can afford to spend on legal services;
  • The minimum and maximum amount that you would be willing to buy or sell the business for;
  • How much of the business you wish to buy or sell (e.g., parts or all of it?);
  • Whether there are other legal issues that need to be taken care of before you buy or sell the business since the lawyer will need to know about what those issues are;
  • If there are other business owners that the decision to buy or sell a business can affect and how they feel about the issue;
  • The types of documents you should bring with you to the meeting; and
  • A list of questions to ask the lawyer about the business transaction and/or their experience in handling similar matters.

What Documentation and Questions Should I Gather Before Meeting with a Business Lawyer?

The types of documents and questions that a client should gather before meeting with a business lawyer may depend on which end of the transaction they are a part of (i.e., are they a seller or a buyer?).

In general, some documents that a client should have ready when meeting with their business lawyer include:

  • A list of business assets, inventory, and other equipment that the business currently owns;
  • Financial documents that prove how financially sound the business is (e.g., profit and loss statements, business bank account documents, tax returns, etc.);
  • A list of contact information of all the owners in the business;
  • The lease agreement for the business (if applicable);
  • Contact information for the real estate agent assigned to complete the deal (if any, or aside from the lawyer);
  • The business’s registration documents (e.g., Articles of Incorporation, etc.);
  • A list of demands that the buyer or seller wishes to negotiate for (e.g., lower or higher sale price); and/or
  • Any paperwork related to legal issues that could affect the sale or purchase of the business (e.g., liens on inventory or equipment).

The client should also prepare a list of questions to ask the attorney during the meeting. For instance, if they do not know or do not understand requirements to buy or sell a business. Additionally, the client should also ask the attorney about their background. This is especially true if this is the client’s first meeting with them and they are not sure whether they want to hire the attorney yet.

What Makes a Case for a Sale or Purchase of a Business Strong? What Makes it Weak?

Some factors that can make a case for the sale or purchase of a business stronger may include:

  • Hiring an experienced attorney to assist with business issues or procedures that a person does not how to handle on their own;
  • Asking questions about a procedure or issue that needs to be explained;
  • Performing due diligence on the business before buying or selling it;
  • Being upfront about all debts and liabilities that the business has;
  • Compromising with a party when their ask is reasonable (e.g., the company is valued at two million, but the seller wants five million);
  • Having a solid business plan or exit strategy in place to follow when the transaction occurs; and
  • Resolving all the business’s debts and liabilities before the closing stage.

Some factors that can make a case for the sale or purchase of a business weaker may include:

  • Not hiring a lawyer to assist with issues or procedures that a business owner is unsure how to handle;
  • Hiding, destroying, or not being up front about business debts and liabilities;
  • Failing to perform due diligence on the business;
  • Not having a plan to sell the business or take it over once it is sold;
  • Behaving unprofessionally during negotiations;
  • Failing to resolve fixable issues before proceeding with the transaction;
  • Refusing to provide or review the business’s assets; and/or
  • Not gathering enough information to make an informed decision or to evaluate the business’s worth.

What are Some Dos and Don’ts for Selling or Purchasing a Business?

Some dos and don’ts for selling or purchasing a business include:

  • Do have a minimum and maximum sale or purchase price in mind before entering into negotiations;
  • Do not purchase or sell a business without consulting a lawyer first if it is worth a lot of money and if the buyer or seller does not know the requirements to buy or sell a business;
  • Do perform a due diligence check on the company beforehand;
  • Do not hide or destroy any debts or liabilities that the business has;
  • Do keep the transaction under wraps until it is official;
  • Do not sell or purchase a business if majority owners are against the transaction;
  • Do cooperate with all parties and behave professionally when negotiating the closing contract;
  • Do not go into negotiations blind (e.g., know what the company is worth and why it is being sold or purchased);
  • Do gather as much information as possible about buying or selling a business (e.g., from lawyers, accountants, other business owners, etc.); and
  • Do not rush the process without vetting every aspect of the business first and assessing all bids for the business.

When Do I Absolutely Need a Lawyer for Buying and Selling a Business?

In general, you should always hire a lawyer when you are involved in a deal to buy or sell a business. As previously mentioned, these transactions pose a lot of risk, not only to the business itself, but also to the business owners. In some instances, a business owner can be held both fiscally and personally legally accountable for the sale or purchase of a business.

Therefore, if you are planning on buying or selling a business, then it may be in your best interest to hire a local business lawyer as soon as possible.

Some scenarios in which you will absolutely need to hire a lawyer before buying or selling a business include:

  • When you are buying or selling a company through a stock purchase (as opposed to asset);
  • If you need help restructuring the business before the purchase or after the sale;
  • When the business is worth a lot of money or is being sold for a high price;
  • If you are at the final stage of the buying or selling process (though you should really hire a lawyer before this point);
  • When the business has multiple owners; and
  • If you need someone to perform due diligence on the business.

On a final note, you should always hire a lawyer when you get to the closing stage of buying or selling a business. During the closing process, the parties will need to sign an agreement that provides the rules governing the sale or purchase.

Thus, you will want a lawyer to draft, review, and/or potentially, negotiate this agreement on your behalf before you sign the contract to finalize the sale or purchase of the business.

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