This is a question I hear every now and then from small business owners about to sell or in the process of selling their business, mostly in smaller deals less than $200,000. The thinking is that attorney fees can be avoided for such a routine transaction.
In reality there is no such thing as a routine transaction when it comes to selling or buying a business, and the same reasons for receiving good legal advice apply to business sales as well. Business law is complicated, especially here in California, and hiring a good transactional attorney to represent your interests is just plain common sense.
Many owners look at the P&L and see Legal Fees as an expense only. If it helps to better conceptualize those as not expenses but “cost avoidance” insurance then so be it. Even the smallest of issues can quickly unravel without the help of a trained and emotionally detached attorney.
Lawyers should be able to advise the seller on the pros and cons of stock sales versus asset sales (although most main street deals will be asset sales), and the nature of the seller’s representations and warranties that will be expected by buyers.
Your attorney may also assist in the preparation of a variety of documents including a sales contract (asset purchase agreement) as well as a promissory note, security agreement, and financing statement if seller financing is part of the deal. A good business brokerage firm in coordination with an escrow company typically has these documents in template form and can be customized for the specific business transaction at hand, reducing the attorney preparation time yet still relying on your attorney review/involvement. Generally speaking, the larger and/or more complicated the deal, the more attorney involvement makes sense.
Whether your on the sell side or the buy side, having a good transactional attorney representing you is an important member of your entire team that should also include a CPA/accountant, financial advisor, insurance professional, commercial banker, and yes even a good business broker!