Buying a Business Part 2: Know Your Risks Before You Sign

Jean Feng

Many people think that a lawyer is only for closing a transaction, but for business, engaging a lawyer sooner rather than later is a more sound decision. Business transactions are often complicated with many legal terms in the documents. It’s never a good idea to sign something without knowing the consequences.

If an agreement is already signed, it can be especially hard for a lawyer to protect you because, at this stage, it may be too late. For example, engaging a lawyer the day before a subject removal is often futile as there is simply not enough time for thorough due diligence.

As long as a client has a serious consideration of purchase, they shall engage a business lawyer. The next step is due diligence, and if needed, consultation with accountants and other professionals to make sure that they know the legal risks involved in the transaction (and potentially structure it in a way that is in favour of the client). After the due diligence is complete, if the client decides to move ahead, documents can be prepared for closing.

In business, it’s important that the documents to be prepared by engaging a lawyer prior to signing agreements. Agreements usually are legally binding, meaning it’s too late for a lawyer to step in and protect someone from a potentially risky situation if the clients already have signed the agreements. Knowing the risks prior to engaging in a transaction is always a better position to start from.