Do I Need a Lawyer to Purchase a Business?

Purchasing a business is a significant and thrilling journey, but it’s also one of the most substantial investments you’ll make. Doing it right involves careful consideration, and getting it wrong can have significant financial consequences. When buying a business, key question is: “Do I need a lawyer to buy a business?” The unequivocal answer is yes. In this article, we will explain why engaging a lawyer is crucial to reducing risk, protecting your assets and ensuring a smooth, legally sound, and efficient business acquisition.

How can a lawyer help me when buying a business?

When buying a business, there are several things you need to consider.

Due Diligence 

First and foremost is the due diligence process. This refers to the deep dive you must take to fully understand the business. The due diligence process will vary depending on the type of business, but it always involves an assessment of the various components of the business. Due Diligence helps you understand exactly what you are purchasing, its true profitability, and whether the purchase is the right choice for you as a buyer.

Due diligence will always include a review of the current and previous financial statements of the business. Ideally, you need to assess how the business performs financially compared to competitors, customer bases/loyalty figures, or any existing contracts between the current business owner and third parties such as other vendors or suppliers of goods and services. This exercise will help you understand the business and can often give you insight into why the owner is selling the business. More importantly, a complete due diligence will help you determine if the purchase it right for you and what the future of the business will look like under your control.

Due diligence can often be a long and sometimes complex process. Engaging a lawyer before you conduct this vital step is essential to ensure that you are looking in all the right places and ascertain precisely what you need to. A lawyer will often be able to provide detailed due diligence checklist which is invaluable in helping you understand the right questions to ask.

Contract Negotiations 

An experienced lawyer in business law will be able to determine whether the sale contract is in your best interest and provide you with the protections you need. Your lawyer will identify essential matters such as whether all the business’s intellectual property is being transferred, whether the seller restrained from competing after the sale what ongoing support the seller will provide and any other critical issues. Your lawyer will also be able to ‘read between the lines’ and determine precisely what you are purchasing and any obligations accompanying your business acquisition.

Purchasing a business is a multi-step process involving input from your lawyer, your accountant, and, depending on the business, possibly other specialist advisors.

Regulatory Compliance

Navigating the legal landscape is complex. Often businesses are subject to various regulations such health, food, and liquor licences and registrations. This may require applications to different authorities. If that is the case, then it is important to understand what the requirements are and the likely time frame for approval and registration. Failing to address compliance issues can lead to legal troubles down the road, making legal expertise indispensable in the acquisition process.

Transition Planning

After the purchase, a lawyer can assist in developing a transition plan, addressing critical operational and legal aspects. One area that needs careful consideration is employees. Will you be taking on the existing staff or not? Are there staff members who are essential to the business transition because of their knowledge and skill? If so, then the current wage and bonus structure (if any) should be reviewed. Post purchase it is often good to address the contractual obligations of the business. The due diligence process will have identified areas where improvements can be made with supplier contracts and terms of trade. A well-considered transition plan is crucial for minimizing disruptions and ensuring the ongoing success of the acquired business.

Having a lawyer on your side is indispensable to avoid overlooking critical aspects when purchasing a business.

Contact Lord Commercial Lawyers Today

Buying a business is a huge purchase you want to get right. As experienced business lawyers well versed in all the elements of buying a business, Lord Commercial Lawyers is ready to provide the necessary expertise and guidance to ensure your purchase is smooth, efficient and fulfilled in your best interests. To inquire about purchasing a business, please contact us at (03) 9600 0162 or info@lordlaw.com.au.