The Three People You Need When Buying (or Selling) Your Business
In my practice, I regularly deal with buyers and sellers involved in asset purchase agreements and the non-compete issues that arise from these transactions. I’ve represented buyers who wish to sue the seller for violating the non-compete provision of their agreement, as well as sellers who want to ensure they comply with the non-compete provision of their agreement as they seek to re-enter the market.
These transactions are generally worth between a few hundred thousand and a few million dollars. The seller is typically a small, family-owned, privately held business, while the buyer is usually a slightly larger, privately held business. When these deals go sideways, sloppily drafted transaction documents that were put together by a random general practitioner or (even worse) downloaded from the internet are often the culprit.
It seems reasonable to think that if you’re going to be a party to a transaction with a few hundred thousand dollars or more at stake, you’d make sure the right people are advising you. Unfortunately, parties to these types of transactions often fail to identify the people they’ll need to guide them through the process. Below you’ll find the three people you should have by your side before, during, and after the purchase or sale of your business:
(1) Transactional Attorney: This person should – at a minimum – be experienced in drafting asset purchase agreements and, ideally, will also have a solid tax background;
(2) Tax Person: Your accountant. Even if your Transactional Attorney is top-notch, it’s best practice to have your CPA involved in these types of transactions; and
(3) Litigation Attorney: This one is often overlooked. While your Transactional Attorney will structure the deal and draft the contract, your Litigation Attorney will clean up the mess if things go south. A Litigation Attorney who’s experienced in non-compete issues will structure the non-compete provision so that, if representing the seller, the restriction is as minimal as possible, while if representing the buyer, the non-compete provision is as restrictive as possible. Additionally, you’ll want your Litigation Attorney to review the entire transaction and look for any potential exposure or liability.
I can’t overstate the importance of making sure you get the appropriate transactional, tax, and litigation advice when buying or selling your business. Do it right on the front end and you’ll save yourself a ton of risk, money, and exposure down the road.
Rick Duarte is the owner of The Duarte Firm, P.A., where he focuses his practice on business law. He received his law degree from the Emory University School of Law and has been named a “Rising Star” in Business Litigation by Florida Super Lawyers for 2016 – 2019. Rick also serves as general counsel to emerging and medium-sized businesses, guiding clients through corporate governance, risk management issues, and strategic decisions where business and law intersect.