Do I need a solicitor to buy a business?

Although it’s not a legal requirement, if you’re wondering ‘Do I need a solicitor to buy a business’, the smart answer is always ‘yes’. 

Generally speaking, given the complex legal requirements when buying a business, it’s incredibly risky to proceed without one. It can make moving through the various stages more difficult and time-consuming. It also increases the likelihood of oversights that could lead to costly mistakes and jeopardise your return on investment.

In this article, we’re going to discuss what business purchase lawyers do, how you can find a good one and when it may be possible to buy a business without one.

Why do I need a solicitor to buy a business?

It’s easy to underestimate the complexity of buying a business, particularly if it’s a small and seemingly straightforward retail store or industrial unit. However, there’s still an awful lot involved in the transaction that you need to get right.

With the excitement of taking over operations and planning for the future, it can be tempting to move forward without professional legal advice. Some buyers may also be concerned about the costs of hiring a business purchase solicitor.

However, even seemingly straightforward transactions can hide significant risks. Skipping legal guidance can leave you exposed to hidden liabilities, contractual pitfalls and regulatory issues that could end up costing far more than the solicitor’s fees.

What role does a solicitor play in business acquisitions?

Due diligence

A crucial part of a business purchase lawyer’s role is to thoroughly examine the business to identify any red flags or potential liabilities. They will scrutinise its:

• financial performance
• assets
• liabilities
• contractual obligations
• employment agreements
• legal obligations
• current lease

They will assess whether there are issues that could lead to costly disputes or affect your ability to run the business successfully. Without the help of an experienced business acquisitions solicitor, there could be important details you miss.

Structuring the deal

Business purchase lawyers can advise you on the different ways to structure a business acquisition, for example, as an asset purchase or share purchase. Each approach has distinct legal and tax implications, and your solicitor will be able to explain those to you. 

Working with your accountant or tax adviser, you’ll then be able to choose the most advantageous structure to minimise tax liabilities while meeting your compliance requirements. 

Drafting and reviewing contracts

Another crucial task is reviewing any existing contracts. When buying an established business, it is likely to have an ongoing lease agreement and supplier and employment contracts. 

Your solicitor will help you understand the obligations arising from these contracts and determine whether they could disadvantage you or lead to unexpected financial obligations or disputes. 

The solicitor will also draft or review the sale agreement to ensure it reflects the terms that you have negotiated with the seller. They will ensure the contract protects your interests and addresses key areas, including the transfer of assets, intellectual property rights, employee arrangements and any restrictions on the seller’s future business activities.

Regulatory compliance

Many UK industries, sectors and locations have specific regulations and licensing requirements. Your solicitor will ensure that the relevant licenses are in place and help you transfer or obtain them if necessary to make sure that your business is compliant. 

Negotiating the deal   

Negotiating with the seller is an area where an experienced business acquisition agent or broker can provide valuable support. They will assist with discussions around the purchase price and the main commercial terms of the deal, helping you secure the best possible outcome.

Your solicitor, on the other hand, will focus on the legal aspects of the transaction. They will review liability clauses, non-compete agreements, warranties and indemnities to ensure these provisions are fair. Based on their findings, you may need to renegotiate certain terms with the seller before finalising the deal.

Post-completion support

A business acquisition solicitor can also provide valuable support after completion to ensure a smooth transition to your new venture. They can assist with tasks such as transferring assets and updating company and regulatory registrations to ensure you meet your obligations. 

When can I buy a business without a solicitor?

As we’ve explained, engaging a solicitor is highly recommended when buying a business. However, in some straightforward transactions, for example, where there are minimal assets, no employees and no complex contracts, the immediate risks of proceeding without one may be lower. 

That said, even in these cases, appointing a solicitor will protect you against hidden liabilities and regulatory issues you otherwise might miss.

Examples of business acquisitions that typically pose fewer legal risks include:

• Purchasing a business from a trusted family member where both parties clearly understand the terms and obligations of the deal
• Acquiring a simple business through an established business sales agent who can assist with the legal documentation
• Taking over a sole proprietorship with straightforward finances and no outstanding liabilities

How to find the right solicitor when buying a business?

Given the complex legal requirements when buying a business, it’s essential to work with a solicitor who has the expertise and experience to guide you through the acquisition. 

When choosing a solicitor, you should look for someone with:

• Experience of similar transactions - a successful track record of acting for buyers of businesses of a similar size and sector to yours
• The right expertise - a broad knowledge of purchase agreements, intellectual property rights, lease negotiations, asset transfers and other matters related to business sales
• A good reputation - positive reviews from former clients and a reputation for being communicative, proactive and completing deals in a relatively short timeframe
• Transparent fees - agreeing on a fixed cost for the acquisition provides clarity and may be cheaper than paying an hourly rate

If you are struggling to find a cost-effective business acquisition solicitor you trust, please get in touch with our team. At Eddisons Business Sales, we have sold over £1 billion worth of UK businesses and have worked with some excellent solicitors in that time. We’d be happy to provide a recommendation based on your location and business type.

Ready to buy a business?

If you’re ready to take the next exciting step in your career, our experienced business acquisition agents can guide you. Operating across a wide range of sectors throughout the UK, we help prospective buyers identify the right opportunities, negotiate favourable terms and work closely with sellers and solicitors to ensure a seamless and secure transaction.

If you are interested in acquiring a business with us, get in touch to discuss your requirements or register as a buyer to be the first to hear about exclusive opportunities that match your criteria.