Attorneys vs Business Brokers in a Business Sale
Business brokers and attorneys often work together on business transactions involving the sale of a business. In this brief article, we explore the difference between these two professionals and how each adds value to a transaction.
Do I need an attorney if I have a business broker?
Probably. Attorneys and brokers have different roles. While a business broker should be knowledgeable about various laws and regulations related to the sale of businesses, a broker should not give you legal advice. In practice, a business broker may make recommendations or sometimes even negotiate and draft contracts. However, professional brokers know their limits and should always recommend an attorney to protect their client’s best interests.
Unlike a broker, an attorney’s role is to provide legal advice and representation to the client in the transaction. The attorney will advise on how to structure the deal, favorably draft documents, and negotiate with other attorneys on legal matters in the deal. The attorney takes the responsibility to spot issues and advise on how to resolve them legally. A broker can identify legal issues as well based on their experience, but the attorney should resolve them. For these reasons, it’s important to not only rely on your broker for legal matters.
How do business brokers and business attorneys work together?
A business broker and an attorney should be in regular communication regarding the needs of their client during each phase of the deal. This will ensure that there no are no unexpected surprises.
Both a broker and an attorney can represent and negotiate on behalf of their client, however, sometimes it might be more appropriate for one to take the lead on a particular issue. For instance, sometimes buyers and seller become agitated when lawyers start negotiating certain deal terms, and in these cases, the broker might be better suited to negotiate an issue. Whatever the case, the broker and the attorney should always talk to ensure that each stage of the deal moves forward or put on pause (in the case of a major issue).
What does a business broker do that an attorney won’t?
The broker acts as the quarterback of the deal and will fill many roles. Theoretically, an attorney can represent a client in all aspects of a business transaction. However, just because an attorney can do something doesn’t mean that he or she should.
A business broker’s role is to value the company, prepare and list it for sale, and then oversee the transaction to its closing. Brokers act as the primary intermediary between the buyer and seller, whereas lawyers on each side of the deal will typically only communicate with the other lawyers. Brokers will communicate with all players in the transaction to make sure that information and documents get properly shared.
Should my attorney also serve as my business broker?
There are attorneys that are also brokers. Sometimes, it is feasible that an attorney can provide dual services as both a broker and an attorney, especially in certain industry niches. However it’s often best to hire one person to perform just one role, either broker or attorney. This way, there is no confusion on what services are being provided. Likewise, this will ensure that the advice given is truly independent.