Buying a Business Part 3: How Are Legal Costs Assessed?

Jean Feng

For a business purchase transaction, the cost of engaging a lawyer is assessed by time (hourly rate times hours). The overall cost will depend on the volume of work during the transaction. The legal fees will be in direct proportion to resources used, as well as in proportion to the purchase price. If the transaction is complex and has a high net worth, then the legal fees will reflect that. If the procedure is relatively simple, then the costs may be lower. Sometimes, clients simply want assistance on a few key points, which also keeps costs down.

One important aspect to know is that the initial retainer is not yet paid to the lawyer. It is kept in trust until such time that both parties agree can be transferred to the lawyer’s general account. This may be at the end of the month, or at the end of the transaction. This trust account is in place to protect the client as well as to build confidence for the lawyer to work on the file.

The most important point is to engage a lawyer when there are agreements or contracts to review so that you can be protected. Sometimes clients are unaware of the pitfalls, and this is where a lawyer can really help, as well as save you time and money.