Last year Virginia regained its title of most business-friendly state in the nation. With an A+ workforce and business education ranking, the Commonwealth is rich in business opportunities. Such opportunities often draw business-to-business operations into Virginia. Many such businesses assist Virginia companies in navigating everything from formation to acquisition. Business brokers are akin to real estate agents for businesses. They help other companies or individuals buy and sell businesses, but licensed brokers are seldom authorized to practice law in the Commonwealth. As a result, business brokers cannot provide Virginia buyers and sellers legal advice or prepare legal documents for acquiring/selling a Virginia business. Law firms that assist business brokers in participating in the unauthorized practice of law.
Qualified Virginia Business Acquisition and Sales Attorneys at McClanahan Powers, PLLC
Business brokerage is an unlicensed profession in Virginia. Don’t let private brokerage certifications and associations fool you. Regardless of experience and education, anyone can offer business brokerage services in the Commonwealth. Unfortunately, many inexperienced brokers unwittingly engage in the unauthorized practice of law, which can be detrimental when navigating the complex regulations surrounding Virginia business acquisitions. A closing attorney is not the same as acquisition counsel. The only way to ensure compliance with Virginia and federal business regulations is to speak with an experienced business transaction lawyer. The Virginia business acquisition and sales attorneys at McClanahan Powers, PLLC, can help Virginia businesses avoid illegal brokerage transactions and effectuate the legal transfer of a company in Virginia. Take advantage of your free Virginia business sales and acquisition consultation with us today by calling (703) 520-1326 or contacting us online.
Red Flags to Look for in a Virginia Business Broker
Business brokers play an essential role in marketing and selling businesses in the Commonwealth. Their connections and experience may bring a valuable buyer or seller to the table. However, finding a qualified and professional business broker is difficult in the technological age. In addition, many online business brokerage firms offer brokerage services that don’t comply with Virginia law. Therefore, businesses should look for the following red flags when considering a business broker:
- Offering Forms & Closing Documents: This is not permissible in Virginia. If a business broker offers forms, closing documents, and even simple legal advice, it’s already violating basic Virginia brokerage regulations. They should instead refer you to a Virginia business law attorney that is not associated with the brokerage firm.
- Lack of a Virginia Real Estate License: Real estate is a licensed profession in Virginia, and close to 90% of business brokers have a real estate license. Be leery of brokers who don’t have a real estate license in the Commonwealth.
- Inflation & Lack of Realistic Valuation: Some business brokers inflate the value of a business and the ease of the transaction to attract clients. This is a sign of inexperience and a misunderstanding of the current Virginia business marketplace.
- Lack of an Offering Summary: Your business is entitled to unique marketing. Always ask for customized sales and offering documents, including paper marketing materials and links to online listings. It’s also wise to request samples of past marketing documents and successful transactions.
- Lack of Transparency: Beware of claims that a broker has secret buyers and client lists. A broker that doesn’t provide samples or information on prospective buyers may be operating around Virginia business regulations.
It’s wise to start your search for a business broker by contacting an experienced Virginia business services attorney. These attorneys often work with respected business and real estate brokerage firms and can spot red flags in Virginia’s unlicensed business brokerage industry. If you’ve already found a potential buyer for your business, you do not need a business broker. An experienced Virginia business attorney can draft all necessary documents and handle business transfers on your behalf. This often reduces overall closing costs and ensures compliance with applicable state and federal laws.
Virginia Business Broker Laws and Regulations
Virginia’s laws and regulations governing business brokers are scattered because it’s an unlicensed industry. Certain aspects of brokerage, such as selling real estate with the business, require a real estate license. This triggers Virginia’s real estate laws and regulations. Virginia common law (legal principles found in cases) may also impose specific fiduciary and ethical duties on unlicensed business brokers. Certain businesses’ sales and/or purchases may invoke federal regulatory and anti-trust laws, while parties in different states must determine which rule applies. Further, the Virginia State Bar has held that business brokers cannot prepare sales and purchase documents without violating Virginia law. These documents include:
- Bills of Sale
- Promissory Notes
- Closing Statements
- Closing Documents
- Insurance Agreements
- Sales/Purchase Contracts
- Licensing & Royalty Agreements
Even if an attorney reviews such documents, this doesn’t erase their illegal preparation. A closing attorney must draft the closing documents, but they also don’t work for either party. Instead, a closing attorney’s fee is typically paid via agreements regarding closing costs. Only a top-rated business transaction attorney can determine whether a business in Virginia’s purchase and/or sale is legal and beneficial to its clients.
Don’t Engage a Business Broker without Speaking with a Qualified Virginia Business Protection Attorney
Buying and selling businesses in the Commonwealth of Virginia isn’t as simple as many business brokers make it sound. It’s not a 1-2-3 process, and anyone who claims otherwise isn’t looking out for the best interest of their clients. However, an experienced Virginia business transactions lawyer can help Virginia business owners navigate this complex process. Virginia business service and corporate attorneys can handle most transactional negotiations, draft essential sales documents, help secure financing, and protect your interest during closing. Suppose you need help finding a buyer or acquiring a new business. In that case, the top-rated Virginia business lawyers at McClanahan Powers, PLLC, can connect you with independent, trusted business brokerage firms in the Commonwealth. Protect your investments and bulletproof your business transactions with McClanahan Powers, PLLC. Call us for your free Virginia business sales and acquisition consultation at (703) 520-1326 or contact us online.