How Will My Attorney Assist Me in Purchasing a Business?
Before purchasing a business, one must be very careful to have an attorney review the purchase agreement BEFORE it is signed. Frequently, business brokers place enormous pressure on buyers to sign immediately or the deal will be gone. If you are presented with this situation, you may want to ask your broker to insert an attorney review clause in the contract giving you a certain time period (i.e. 24-48 hours) to have your attorney review and approve the contract. Once the attorney has reviewed the contract and has determined that your interests are protected, it is a legal and binding document once signed by buyer and seller. Normally, the buyer will have a certain due diligence period within which to review the financial documents, lease(s) and other documents pertinent to the business. Your attorney normally will NOT be responsible for reviewing the financial aspects of the business. It is highly recommended that you retain an accountant or other business professional to review these documents to determine the financial soundness of the business. Your attorney, however, will review the existing lease and advise you on the terms of the lease and what they mean to you in the future. For example, if the current lease only has one more option to renew and this option is coming up in the near future, you may want to negotiate with the landlord for an additional option to be added to the lease. Your attorney will assist you in understanding the existing or new lease and negotiating same. Furthermore, as you do not want to purchase a business with liens and debts owed, you will want your attorney to research whether any UCC liens have been filed and whether there are judgments against the seller. Any liens or judgments will need to be paid off at closing by the seller so that you purchase the business free and clear. Finally, your attorney will most likely be the closing agent who drafts the closing statement and reviews the necessary seller documents to make sure that all are in order. Purchasing a business is an expensive undertaking. Having an attorney represent you in the process will certainly make the process smoother and more manageable.