What to Know About Business Transaction Attorneys
The primary functions of a business transaction attorney are to assist business owners with the negotiation and preparation of a variety of complex business contracts. These legal professionals also handle the structuring of all types of business transactions involving the purchase and sale of corporations, limited liability companies (LLCs) and other business entities. They’ll work with all types of business ownership structures, including partnerships, LLCs, C-corporations, S-corporations and sole proprietorships.
A business transaction attorney will help you with business real estate closings involving leases and mortgages, a purchase agreement for new machinery, equipment and other business assets, employment and employee leasing agreements, including buy-sell agreements, a shareholder pact for groups of business owners, an operating agreement for business owners of an LLC, various contracts with independent contractors, suppliers, customers and service providers, commercial collection contracts , confidentiality agreements, licensing & distribution agreements, shareholder or membership pacts, merger and acquisition agreements, and sales and purchases of businesses or business assets.
The skills of a business transactional attorney include: contract negotiation, contract analysis, preparing complex business contracts, preparing business entity formation documents, preparing and filing articles of incorporation and articles of organization, drafting corporate bylaws and formation documents, business consulting, business dissolution, mergers and acquisitions, and business sales.
A business transaction lawyer does not handle litigation or the resolution of litigation issues. A family law attorney, for example, handles divorce proceedings and has a different field of expertise. Sometimes, a business transaction attorney may represent a client in a lawsuit about company issues. This type of lawyer primarily focuses on legal matters that occur when starting, buying, selling, or growing a business.
Advantages of Working with a Business Transaction Attorney
The advantages of employing a business transaction attorney to facilitate the part or entire transaction process include the following:
Legal Compliance
A skilled business transaction attorney will know the law, including state-specific regulations that may not be common knowledge and that will enable you to remain in compliance with current laws. For example, an experienced business attorney will understand warranty, insurance and liability issues that could affect your business.
Risk Mitigation
Hiring a business attorney will help you avoid pitfalls in the business transaction process. An attorney can review contracts and clarify obligations of the parties involved. He or she may also advise you on whether to walk away from or complete a deal that could be a disaster for your business. He or she can identify weaknesses and problems in a contract and provide best practices for resolving them for optimal benefit to your company. A skilled business lawyer also prepares a "road map" to help executives and business owners comply with the law throughout the life of a business deal.
Strategic Advice
If you hire an experienced business transaction lawyer to handle the merger, acquisition or divesture, you could save significant time and money in negotiations and in the process. You also may be able to obtain legal advice on other matters related to a deal, so you do not have to hire two attorneys. For instance, your business lawyer could handle real estate-based transactions as well as the corporate merger and acquisition deal.
Common Business Transactions That Need Legal Oversight
When running a business, there are many internal and external transactions that will require the use of a business transaction attorney. These professionals have the knowledge and experience to ensure your business is following the law on all accounts, and can ensure your assets are protected. A few examples of the types of business transactions that typically require legal expertise include:
Mergers & Acquisitions
The purchase or merging of companies is a major business transaction requiring significant legal expertise. In most cases, a merger or acquisition creates a new business entity that alters your company’s structure. This transaction also typically involves the transferring of ownership to a new investor or company. Given the potential ramifications of a merge or acquisition, ensure you have the backing of a trusted legal advisor.
Contract Negotiation
The majority of business contracts are more formal than what the average person would negotiate for their own. When negotiating new terms with suppliers, clients, or even prospective investors, a lawyer with experience in business transaction development can work to help you develop terms and conditions that will keep your company safe from potential liabilities.
Developing an Nondisclosure Agreement
If you’re developing or taking part in a business that involves unique operational processes, you’ll want to protect your strategies from competitors. It is not legal for a competitor to steal your intellectual property or trade secrets, but proving those thefts are often difficult and time consuming. As you consider developing a nondisclosure agreement, consult and work with your business transaction lawyer to determine appropriate conditions that will keep your business interests secure.
Property Purchasing
Buying or selling a company can be a complex legal transaction. If you are developing new commercial or retail space, it is recommended to make use of a legal advisor to help guide the transaction and minimize the risk of future issues. Even in the case of a simple business transaction, consider bringing in a lawyer to avoid potential issues down the road.
Hiring a lawyer to oversee business transactions is one of the best ways to mitigate risk and enjoy peace of mind. While knowledgeable in many areas, business transaction attorneys specialize in mergers and acquisitions, contract negotiation, nondisclosure agreements and property purchasing to help you take on any business transaction.
How to Select the Right Business Transaction Attorney
Selecting the right business transaction attorney for your needs is crucial. When a business transaction attorney is involved in a business transaction, they will be a trusted counselor who is committed to the long-term success of your company. Not only are they responsible for negotiating a favorable closing, but also for fortifying the legal foundation of the client’s business for the future. It is important to choose an attorney that is a good fit for you and your business. Here are some things to consider when choosing a business transaction attorney: Experience – Does your attorney have experience with the particular business transaction you are considering? For example, if your company has plans to make an employment offer to the CEO of another company, you need a business attorney who is knowledgeable in employment agreements . To get a better idea of their qualifications, review their website and their past experience. Specialization – Look for an attorney who specializes in business transactions. You should look for an attorney who you believe will have strong general business skills as well as an understanding of the industry and market that will be covered in the transaction. Reviews – Search for online reviews from prior clients. Are there any complaints? By bearing these factors in mind, you’ll find an attorney who knows business transactions and who will become an asset for your company.
Business Transaction Attorneys Fees and Costs
Lawyers who handle business transactions in Virginia, and other states, tend to be paid under two main fee structures. In a majority of the cases, they are paid by the hour, but they may also charge either an up-front retainer fee or a contingency fee.
Hourly Rate
The most commonly-seen fee structure for a business transaction attorney is to charge an hourly rate for services provided. A client will be charged for every hour (or fraction thereof) spent on their case, including phone calls and emails to the client, communications with third parties, and research time. Some lawyers will bill in six-minute intervals, while others may bill in 15-minute intervals. Clarifying this with your attorney at the time of your initial meeting is important.
For example, if the lawyer’s hourly rate is $250.00 and he or she spends three hours on the case, you will be billed $750.00 for that particular task. The rate for the attorney’s time might then change, depending on what type of work he or she is doing, and you will be billed according to that rate.
Hourly rates can vary widely, from as low as $100 per hour to as high as $400 per hour or more. Senior partners with years of experience will have a higher hourly rate than a junior associate working under them. Your geographical location will also affect the hourly rate. Urban attorneys will generally charge more than lawyers in small towns so that they can maintain a certain standard of living in the competitive economy. It is also common for lawyers to increase their hourly rates annually, so you should clarify your lawyer’s rate for the year at your initial visit.
Retainer Fee
Personal injury attorneys in Virginia usually work on a contingency fee basis, so their clients are not usually required to front any money until there is a settlement or award. However, business transaction lawyers, many of whom are employed directly by private businesses and corporations, play a different role and may require a retainer fee up front. When you are given a fee estimate for the work you would like done, the attorney might require you to pay a portion of the total amount owed up front as a sign of good faith. This is called a retainer and it is generally non-refundable.
For example, you may have a $20,000 contract that you need the attorney to review. A small retainer fee, maybe two or five percent, will cover the lawyer’s time spent talking about the contract with you, getting copies of the contract, reading it, and giving you an overview of the terms. When the contract work is finished, you will receive a bill for the remainder of the hours it took the lawyer to review the contract with you and address any other issues you may have needed legal advice on.
Case Study: Successful Transactions with Business Transaction Attorneys
The following are some examples of real-life cases where business owners or entrepreneurs were represented by a business attorney and the success that they were able to achieve with their transactions.
Company Acquisition
After months of negotiations, an entrepreneur was finally able to acquire another company that would enhance their plan for expansion. This acquisition would take the entrepreneur’s company from a local company to an international one. After the deal was set, the entrepreneur discovered that the lawyers for the company being acquired had made some mistakes in the drafting. By having done everything correctly initially, all of this could have been avoided. It is therefore recommended that you have a business attorney throughout these dealings rather than simply for the signing of the contracts.
Franchise Agreement
A restaurant chain seeking to expand did so by funding individual franchisees through their own loans with a specific set of terms. They could be charged a royalty fee as a percentage of gross revenue and also pay into a fund that helped advertise all locations. While legally , the franchisees were responsible for a majority of the costs and responsibilities relating to the restaurant, the franchise agreement made it a requirement that the parent company provide food, equipment and support. The company sought the services of a business transaction attorney to make sure that all of these needs would be met without being an expensive venture for all involved.
Failure to Meet Legal Standards
A local waste composting company was found to be out of compliance with a local ordinance. The ordinance in question, a pilot program, required that certain outlets recycle compostable waste. The entrepreneur who owned the composting company was not receiving adequate volume to meet the demand for the compost that the program required. Because of this, the company had to close. The entrepreneur did not have a business transaction attorney help file it and therefore lost the opportunity to profit while still being compliant with the law. A business transaction attorney could have helped them negotiate with the city to find alternative uses for the compost waste and keep the business alive.