Avoiding Legal Mistakes When Selling Your Business

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 744 words

The legal mistakes that hurt sellers most happen before a buyer ever appears: no experienced transaction attorney, a weak confidentiality agreement, and loose ends in contracts, ownership records and licenses that a buyer's lawyer will find in due diligence. Each one can cost you time, leverage or price. All of them are cheaper to fix early.

This article covers that groundwork. The contracts signed during the deal itself, the letter of intent and the purchase agreement, deserve their own attention, and the right attorney will take you through them.

Mistake one: hiring the wrong lawyer, or hiring one too late

Your company's regular attorney may be excellent at leases, employment matters or disputes and still be the wrong person to draft and negotiate a purchase agreement. Selling a company is a specialty. A transaction attorney who does this work regularly knows which buyer requests are standard, which are aggressive, and where sellers give away protection without noticing.

Bring that attorney in before you sign a letter of intent, not after. Many of the terms that decide how much risk you carry after closing are settled, at least in principle, at that stage. An M&A advisor works alongside your attorney and CPA; it does not replace them. See which advisors belong on your sale team.

Mistake two: sharing information without a proper NDA

A confidentiality agreement, often called an NDA (non-disclosure agreement), should be signed before a buyer learns your company's name, let alone sees your financials. Without the right terms, a competitor posing as a buyer can learn your margins, your pricing and the names of your best people, then walk away. A useful NDA does more than promise secrecy. Look for:

• A clear definition of confidential information, including the fact that the company is for sale.
• A ban on contacting your employees, customers, suppliers or landlord without permission.
• A non-solicitation clause, so a buyer who walks away cannot hire your key people.
• A duty to return or destroy information if talks end.
• Coverage of the buyer's advisors, lenders and investors, not only the buyer itself.

Mistake three: going to market with legal loose ends

A buyer's attorneys review the company's legal records line by line. Problems they find late become reasons to lower the price or delay closing. Fixed early, most of these issues are routine paperwork; raised by a buyer a few weeks before closing, the same issue becomes a negotiation. Before you go to market, have your attorney review these areas and fix what can be fixed:

• Ownership records. Stock ledgers, operating agreements and any promises of equity made to employees or partners.
• Key contracts. Customer, supplier and lease agreements, especially clauses that require consent if the company is sold or the contract is assigned.
• Licenses and permits. Whether they are current and whether they transfer to a new owner.
• Intellectual property. Whether the company, rather than you personally, owns its name, website, software and designs.
• Employment matters. Worker classification, written agreements with key staff, and any open claims.

Mistake four: signing a letter of intent without knowing what binds you

Most of a letter of intent is non-binding, but some parts usually are, typically confidentiality and exclusivity, which stops you from talking to other buyers for a set period. Signing an LOI with a long exclusivity window and vague terms hands leverage to one buyer at the moment you have the least of it.

Some sellers also negotiate for the buyer to cover certain costs if it walks away without good reason. Whether that is realistic depends on the buyer and the deal, and your attorney should advise. The stronger protection is simpler: have several offers in hand before you sign any of them, so the terms you accept are the best of several rather than the only ones on the table.

How MDR & Associates handles the legal side

MDR & Associates is not a law firm and does not give legal advice. What it does is make sure the legal work happens at the right time. Every buyer signs a confidentiality agreement and completes a financial profile before seeing any detail, multiple letters of intent are negotiated at the same time, and the firm works alongside your own transaction attorney and CPA from engagement to closing. For a checklist of what to gather, see the documents to organize before going to market and the ten-step process. To see where your company stands first, request a free valuation snapshot.

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Questions owners ask next

When should I hire a transaction attorney?

Ideally before you sign a letter of intent, and earlier if your records need cleanup. The attorney can review ownership documents and key contracts while your advisor prepares the marketing, so problems are fixed before a buyer's lawyer finds them and uses them to renegotiate.

Does an NDA really stop a buyer from misusing my information?

It gives you legal remedies if a buyer breaches it, which is a strong deterrent, but it is not a guarantee. That is why information is released in stages: a blind profile first, details only after a signed NDA and proof the buyer can fund the purchase, and the most sensitive items last.

Who pays for the attorneys when a business is sold?

Each side pays its own. Your legal fees are separate from the M&A advisor's success fee, and a transaction attorney will usually quote hourly rates or an estimate for the deal. Budget for it early; good counsel usually saves more than it costs through the protections it negotiates.