How to Circumvent Three Legal Mistakes Sellers Make

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 729 words

The three legal mistakes that hurt sellers most are sharing information before a proper confidentiality agreement is signed, relying on a general lawyer, or none, instead of a transaction attorney, and moving into due diligence without a written letter of intent. Each is easy to avoid, and each can cost far more than the time or fees it seems to save.

Owners who built a company themselves are used to learning on the job. A sale is the one place where on-the-job training is expensive, because most owners do it only once.

1. Disclosing before a confidentiality agreement is in place

Nothing that identifies your company, and nothing sensitive about it, should reach a buyer before they sign a non-disclosure agreement, or NDA. A handshake promise or a one-line email is not enough. A proper NDA for a business sale usually covers:

• What counts as confidential, including the fact that the company is for sale.
• What the buyer may use the information for, and nothing else.
• No contact with your employees, customers, suppliers or landlord without permission.
• No hiring or soliciting your employees for a set period.
• Return or destruction of the information if the buyer walks away.
• Which of the buyer's advisors and lenders may see it, and on what terms.

2. Selling without a transaction attorney

The lawyer who handles your leases and collections may be excellent, but a company sale is specialized work. A transaction attorney who regularly handles business sales knows what is normal in a purchase agreement and what is not. They negotiate the representations and warranties, the factual promises you make about the company; the indemnification, which is your obligation to cover the buyer's losses if those promises prove wrong; any escrow or holdback of part of the price; and the scope of your non-compete. These clauses decide how much of the price you actually keep and for how long you remain exposed after closing.

Bring the attorney in before the letter of intent is signed, not after, because the letter sets the frame for everything that follows. Your M&A advisor can recommend attorneys experienced in business sales, and our answer on the advisors to have on your sale team besides the M&A firm explains how the roles fit together.

3. Moving ahead without a letter of intent

Some owners skip the letter of intent, or LOI, because they worry it will slow things down or scare the buyer. The opposite is true. Without one, you enter due diligence, opening your books and sharing sensitive detail, with no written agreement on the basic deal. Disputes that should have been settled in week one surface in month three, when your leverage is lower.

A good LOI sets out the price and how it is paid, including cash at closing, any earnout or seller note, whether the buyer is purchasing assets or ownership interests, the working capital expected at closing, financing, the timeline, your role after the sale and the length of exclusivity. Most of it is non-binding, but confidentiality and exclusivity clauses usually bind. A buyer willing to put terms in writing is a buyer taking the process seriously. What happens next is covered in what happens after you receive a letter of intent.

Legal protection does not replace the business decision

Your attorney protects you from legal risk; your advisor runs the process and negotiates the commercial terms; your CPA handles tax. You make the decisions. An attorney will point out every risk in a draft, which is their job, but not every risk is worth fighting over. Ask them which points could actually cost you money and which are standard, and spend your negotiating capital on the first group. Each professional works best when all three are involved early and talk to one another, rather than being handed the deal one at a time.

How MDR & Associates coordinates the legal steps

In the firm's ten-step process, buyers sign a confidentiality agreement and complete a financial profile before seeing anything that identifies you. When several buyers are interested, their letters of intent are negotiated in parallel, and each one is reviewed with you in person before you sign anything. The firm works alongside your own transaction attorney and CPA through due diligence, legal documents and closing. For a first view of what your company might be worth, request a free valuation snapshot.

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Questions owners ask next

When should I hire a transaction attorney?

Before you sign a letter of intent, and ideally before you go to market so they can review your contracts, leases and company documents for problems a buyer would find. The letter of intent shapes the purchase agreement, so having an attorney review it is far cheaper than fixing its terms later.

Is a letter of intent legally binding?

Mostly not. Price, structure and other deal terms are usually non-binding until the purchase agreement is signed. Certain clauses, typically confidentiality, exclusivity and sometimes expense terms, are usually binding. Your attorney should confirm which parts of your specific letter commit you.