Negotiated: Four Top Tips for Long-Distance Counsel
State representation is important for securing the best deal
Having served both as counsel for clients buying and selling businesses locally, and serving as local counsel for out-of-state buyers in the purchase of a business, I understand the importance of both sides. Utilizing counsel both out-of-state and locally to facilitate your transaction is particularly advantageous for handling the special hurdles that long-distance purchases carry. When entering negotiations for what can be a very large investment, it is essential to have the right people in your corner looking out for your interests as you embark on this new journey. While the dreams are soaring and the anticipation is high, purchasing a business is not had without a little hard work.
To help accomplish the end goal, here are the top four pointers for out-of-state buyers seeking to purchase a business:
- Determine the Workload Distribution
Probably the most important conversation that a client will have with their local and long-distance counsel is the distribution of tasks that need to be accomplished in order to purchase a business. In my most recent experience, where my firm served as out-of-state counsel for an investment company purchasing a local business, we provided legal expertise on establishing various holding entities for purchase of the business, as well as serving in an advisory capacity on questions of local law. The allocation of roles within this multi-attorney relationship with the client happened in the very early stages of our firm’s engagement with the client.
- Know the Fee Structure
It is always important for a client to understand the fee structure in which they will incur fees and costs from an attorney. It is even more important for an out-of-state buyer who is likely incurring fees from two attorneys – the attorney in their home state and the attorney in the state where the business is located. It is very typical for attorneys to provide fee agreements for the client’s consideration and signature. Having a fee agreement helps everyone stay on the same page for issues regarding what will be billed, what rate will be charged, whether a portion or all the services will be hourly or on a flat-fee basis, and the amount of retainer required by the attorney to begin performing legal services. This agreement can also be instrumental in understanding which attorney will perform each task needed to complete the business purchase, as discussed above. Having an open and honest conversation about fees goes a long way in preventing future conflict between clients and their various counsel.
"When entering negotiations for what can be a very large investment, it is essential to have the right people in your corner looking out for your interests as you embark on this new journey."
- Tosha Heavican, Attorney
3. Surround Yourself with Experts
Choosing an attorney and other advisors that are comfortable with the local laws relevant to your business purchase is key to efficiently and cost-effectively purchasing a business. For example, in the state of Nebraska, when an individual sets up an entity, first they must file a Certificate of Organization with the Secretary of State. Once the filing is accepted, notice of the entity formation must be published in Nebraska in a newspaper of general circulation near the designated office of the entity. If publication is required in another state, such publication costs and requirements range drastically, depending on which state you are establishing your entity. If your company planning to operate in multiple states, additional filings are likely required in the foreign states in which your business will operate. A local attorney will be able to advise you of what is required to comply with local law for your entity.
4. Start Early
The added factor of distance, not otherwise present with a local buyer, can prolong the process of document review, document approval, negotiation and other logistics. While technology proves helpful in perpetuating the transaction, there is often delay in receipt of faxes, emails and overnight packages. Frequently there can be a disconnect or loss of understanding in written communication that an in-person conversation would not suffer. In order to overcome some of those communication barriers, often the buyer, attorneys and other professional advisors have to spend extra time writing out explanations in emails or participating in telephone conferences. Failing to allot yourself enough time to have those important conversations breeds mistakes and misunderstandings, which is not what any buyer wants going into such a large investment. Allow yourself and your advisors enough time to properly consider the task ahead and obtain the best result for you.
Arming yourself with the right knowledge will ease your transition to ownership, both locally and remotely. It’s in your best interest to seek out the proper counsel so that your business needs are met and your company can flourish.