Ken <Reply to NG only wrote in message A friend of mine wants to sell his small business. He works from home with only his wife and the odd part time person helping out. He paid ?30,000 ten years ago and wants to offer for ?35,000. It is a business where there is no freehold or leasehold interests as he works from home so just the goodwill and a very small inventory of equipment.  When he bought there was no contract just a simple exchange of letters confirming the key points. His dilemma is whether he needs to spend money with a solicitor on getting a contract drawn up or whether he can do, as he did when he bought the business, just a simple exchange of letters covering the key points. His solicitor has said it could be a ?1500 to ?2000 bill if they were involved which seems so unnecessary or is it? He would be foolish not to use a solicitor. Think of it as insurance. And yet nobody ever instructs a solicitor when they buy a new car, which could easily cost ?30,000. Could you explain exactly *what* problems the OP would be protecting himself against if he used a solicitor to sell his business? It occurs to me that both sides will need to make sure that the new owner will not be liable for past debts/liabilities (maybe a job that went wrong, causing damage to a customer) and that he will indemnify the old owner against liability for any mistakes he himself makes. And it will be necessary to ensure that the public liability insurance gives appropriate cover for both. Having said that, I suspect that it is the purchaser rather than the seller who would have most reason to protect himself by using a solicitor. He's putting up his money and would want to ensure that henceforth the clients go to him, not to the old owner.

A friend of mine wants to sell his small business. He works from home with only his wife and the odd part time person helping out. He paid ?30,000 ten years ago and wants to offer for ?35,000. It is a business where there is no freehold or leasehold interests as he works from home so just the goodwill and a very small inventory of equipment.  When he bought there was no contract just a simple exchange of letters confirming the key points. His dilemma is whether he needs to spend money with a solicitor on getting a contract drawn up or whether he can do, as he did when he bought the business, just a simple exchange of letters covering the key points. His solicitor has said it could be a ?1500 to ?2000 bill if they were involved which seems so unnecessary or is it? It depends on the nature of the transaction. Is there to be any earn-out agreement, or is the whole purchase price paid at the time of sale? If so, that can hardly be simpler for the seller - just receive the cash and hand over the items being sold. On the other hand, there may be warranties etc. I guess that the seller would want a non-disclosure agreement before letting any prospective buyers sniff around. He might want help drafting that, although various examples can be found on the www. 1.5-2k is not a huge fee for this sort of work, and the advantage is that a good solicitor with experience in this area will not just help deal with the contract, but will also have a better idea of what it is reasonable for a buyer to demand in a case such as this. For example, the buyer will probably want some sort of non-compete clause. A solicitor could advise on how long that should be for and what it should cover. I agree. If the price is received in cash, the solicitor's role will largely be to deal with the buyer's requirements. If the buyer isn't using a solicitor and is happy with an informal agreement, the seller is probably OK. If the buyer has a solicitor and produces an 80 page agreement, the seller needs a lawyer (or a new buyer). The seller does need to make sure all the business liabilities are settled. He is usually better settling debts out of the proceeds of sale rather than relying on the buyer to settle his liabilities. It needs to be clear how the price is calculated and what it includes - eg who receives money owing to the business, who bears which debts, what happens to any HP agreements, how part-completed contracts are handled etc. If any part of the price is payable later, I would definitely use a solicitor. More complicated if he is selling shares in a company, but this sounds like an unincorporated business. The quoted fee is very reasonable. Chris R

Bystander < This e-mail address is being protected from spam bots, you need JavaScript enabled to view it posted Ken <Reply to NG only wrote in message A friend of mine wants to sell his small business. He works from home with only his wife and the odd part time person helping out. He paid ?30,000 ten years ago and wants to offer for ?35,000. It is a business where there is no freehold or leasehold interests as he works from home so just the goodwill and a very small inventory of equipment.  When he bought there was no contract just a simple exchange of letters confirming the key points. His dilemma is whether he needs to spend money with a solicitor on getting a contract drawn up or whether he can do, as he did when he bought the business, just a simple exchange of letters covering the key points. His solicitor has said it could be a ?1500 to ?2000 bill if they were involved which seems so unnecessary or is it? He would be foolish not to use a solicitor. Think of it as insurance. And yet nobody ever instructs a solicitor when they buy a new car, which could easily cost ?30,000. Could you explain exactly *what* problems the OP would be protecting himself against if he used a solicitor to sell his business? ..and what risk is he offsetting by doing it, since in the case I'm aware of when a house purchase went wrong the solicitor was covered by weasel words up to the hilt and didn't actually add any security to the sale process at all, when it mattered...

Bystander < This e-mail address is being protected from spam bots, you need JavaScript enabled to view it posted Ken <Reply to NG only wrote in message A friend of mine wants to sell his small business. He works from home with only his wife and the odd part time person helping out. He paid ?30,000 ten years ago and wants to offer for ?35,000. It is a business where there is no freehold or leasehold interests as he works from home so just the goodwill and a very small inventory of equipment.  When he bought there was no contract just a simple exchange of letters confirming the key points. His dilemma is whether he needs to spend money with a solicitor on getting a contract drawn up or whether he can do, as he did when he bought the business, just a simple exchange of letters covering the key points. His solicitor has said it could be a ?1500 to ?2000 bill if they were involved which seems so unnecessary or is it? He would be foolish not to use a solicitor. Think of it as insurance. And yet nobody ever instructs a solicitor when they buy a new car, which could easily cost ?30,000. Could you explain exactly what problems the OP would be protecting himself against if he used a solicitor to sell his business? ..and what risk is he offsetting by doing it, since in the case I'm aware of when a house purchase went wrong the solicitor was covered by weasel words up to the hilt and didn't actually add any security to the sale process at all, when it mattered... The sale needs to be legaly established , best way to do this is via a solicitor this will establish what is actually being sold , the business the assetts , the good will sales ledger etc Find out what the solicitor is going to do for the ?2000.00 , get a few more quotes  

And yet nobody ever instructs a solicitor when they buy a new car, which could easily cost ?30,000. Nobody? I can assure you when I bought cars which cost ?20,000, ?26,000 and ?60,000 I had the contracts examined by a solicitor in each case. And I had the contracts amended before I signed them as a consequence of the consultation.

I HAVE TRIED POSTING THIS FOLLOW UP BUT DID NOT APPEAR SO HOPING IT WILL THIS TIME It is a retirement sale combined with worsening health so there is no way he will work again unless a few hours but may be paid or voluntary work. He is 100% sure he will never get involved again in that type of business again. The position is very much as it was for the person he first bought from and in the exchange of letters (which were several pages long) there were points confirming the seller would not work as an owner or employee, in the same type of business, within 100 mile radius, for at least five years. The method of sale is proposed to be an exchange of letters, at which point 50% of the sale price to be paid and then a completion date four weeks on where the balance of the money is paid. Since my first post he has shown me the original letters that were exchanged and the seller, or someone on their behalf,  had a legal mind due to the way they were set out and so I feel he could copy them. The Non-disclosure is a good idea and I will look into that. Does anyone know whether the sale price should be + Vat as it is a Vat registered business? I assume the buyer would be, or would become, Vat registered so the payment does not have to be made or could be claimed back on their first Vat return. Ken