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Reasons to Hire a Corporate Lawyer When Purchasing a Business

by Mihkel Holmberg on Sep. 12, 2018

Business Business  Merger & Acquisition Business  Business Organization 

Summary: Reasons to Hire a Corporate Lawyer When Purchasing a Business

Hiring a Corporate Lawyer to Assist

Purchasing a business without hiring a corporate lawyer to assist in the purchase would not be a smart thing to do. There are too many legal complexities that must be addressed. Failing to address any of those complexities could cost you much more than the cost of hiring a lawyer in the first place.

A lawyer can help assure that you acquire what you think you are buying, and are not assuming liabilities you knew nothing about. Some businesses are straddled with debt or have other existing obligations that simply mean that they should not be acquired, at any price, or only in compliance with bankruptcy laws. Only a thorough legal due diligence review conducted by a seasoned corporate lawyer can protect a purchaser and help him or her determine the viability of the business going forward.

A lawyer will help you decide on how to structure the purchasing entity. Do you need to incorporate a corporation first to be the buyer? Doing so may limit the risks associated with operating the business.

If you are acquiring the shares of a corporation, there are addition things to consider. Some businesses will have complex ownership structures that require careful consideration. If the ownership structure is divided among several investors, the target corporation’s articles or the target corporation’s shareholders’ agreement will likely have to be considered to determine whether there is a formal procedure that must occur in order to permit the sale of the business to another investor. This might involve requiring a certain percentage of investors to be consulted during a formal meeting in order to determine whether a sale would be permitted.

If the purchaser is acquiring a distressed business, a corporate lawyer would likely advise its client to determine the major creditors and what their rights are during bankruptcy proceedings.

Always consult a lawyer before buying any business.

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