The Top Three Major Legal Mistakes to Avoid During a Sale

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 741 words

The three legal mistakes that most often cost sellers money or sink deals are sharing information without a signed non-disclosure agreement, selling without an experienced transaction attorney, and skipping or rushing the letter of intent. Each looks like a way to save time or money early on. Each tends to cost far more later.

Legal mistakes are hard to undo because the documents outlive the deal. A careless promise in a purchase agreement can follow you for years after the money is wired. Most of these mistakes are avoidable when the right people are involved from the start.

Mistake one: no non-disclosure agreement

A non-disclosure agreement (NDA) is a contract in which a prospective buyer agrees to keep what it learns confidential and to use it only to evaluate the purchase. Without one, a buyer who walks away is free to tell your competitors, customers or staff that you are selling, or to use your pricing and customer information itself. Deals fall through often, so assume any buyer could be the one that walks.

A useful NDA covers more than secrecy. It should limit who at the buyer may see the information, bar the buyer from soliciting your employees and customers for a period, require documents to be returned or destroyed if talks end, and state which law applies. Have your attorney review it rather than accepting a buyer's form. Your advisor should also keep a record of who signed and what each buyer received, so that if something leaks you know where it came from.

Mistake two: no transaction attorney

Every seller needs an attorney, and specifically one who handles business sales. A long-time general counsel or family lawyer may be excellent at leases and disputes yet unfamiliar with purchase agreements, indemnities and escrow terms. The attorney's work starts before marketing, with clean-up: corporate records and minutes, contracts with change-of-control clauses, licenses and any open claims. Buyers grow nervous when basic paperwork is missing. Choose the attorney before you choose a buyer; bringing one in only after an LOI is signed leaves little time to fix what they find.

Your attorney then drafts or negotiates the purchase agreement, including the representations and warranties (statements of fact about the company that you stand behind) and the indemnification terms that decide what you owe if one proves wrong. Our answer on the representations and warranties a business seller should expect explains the usual ones.

Mistake three: skipping or rushing the letter of intent

A letter of intent (LOI) sets out the main terms before the expensive legal work begins: price, how it is paid, what is included, working capital, the owner's role after closing, the timetable and a period of exclusivity. Most of an LOI is non-binding, but the confidentiality and exclusivity terms usually are. Sellers sometimes skip it to keep momentum, or sign a vague one to reach closing sooner. That leaves the buyer room to reopen every point later, when you have stopped talking to anyone else.

A clear LOI is also your best test of whether a buyer is serious and able to close. Keep exclusivity short and tied to progress, and settle the terms that matter most to you before you sign, while competition still exists. If a buyer resists putting its terms in writing, treat that as useful information about the buyer.

Other terms owners often overlook

The same care applies to a handful of points that tend to surface only when the purchase agreement is drafted, when changing them is hardest. Ask your attorney to walk you through each one before the LOI is signed, and ask your CPA to model the tax cost of the structures on the table:

• Change-of-control clauses in customer, supplier, lease and loan contracts
• Broad personal guarantees or open-ended indemnities after closing
• A non-compete whose scope and length do not fit your plans
• Tax structure, such as an asset sale versus a stock sale, left until the last minute

How MDR & Associates works with your attorney

MDR & Associates is not a law firm and does not replace your attorney; we work alongside your transaction attorney and CPA. Every buyer signs an NDA and completes a financial profile before seeing any detail, letters of intent are negotiated in competition so key terms are set while you still have options, and a principal of the firm is in every negotiation. Read our FAQ or see the ten-step process, then contact us.

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Questions owners ask next

Who drafts the purchase agreement, my attorney or the buyer's?

In many lower-middle-market deals the buyer's attorney prepares the first draft and the seller's attorney negotiates it. What matters most is that your attorney has handled business sales and pushes back on representations, indemnity caps, escrow and non-compete terms. Sellers with competing offers sometimes win the right to draft first.

Is my advisor's standard NDA enough to protect me?

A well-drafted NDA signed by every buyer before any detail is shared is normally the right starting point. Have your attorney review the form once, and again whenever a buyer asks for changes. Large strategic buyers sometimes insist on their own form, and your attorney should compare it with yours.