Legal Pitfalls to Avoid When Selling Your Business

Selling your business is a lot like hosting a big dinner party. You want everything to be perfect, the table set, the food hot, the guests happy. But if the oven’s broken, the dog runs off with the turkey, and your in-laws start arguing about politics… well, you might wish you’d just ordered takeout.

When it comes to selling your business, the “oven,” the “turkey,” and the “in-laws” are your legal details. If you don’t get them in order before inviting buyers to the table, the sale can burn to a crisp.

At EDGE Business Advisors, we’ve seen perfectly good deals fall apart because sellers weren’t legally prepared. To keep you from becoming a cautionary tale, here are seven common legal pitfalls to avoid, with a sprinkle of humor to help them stick.

Lease Problems, AKA Landlord as the Uninvited Guest

Your landlord has more power than you might think, especially in a commercial property.

If your lease can’t be assigned or renewed, your buyer might walk away faster than you can say “triple net.” Some landlords even see a pending sale as their chance to “renegotiate” (translation: increase rent).

Pro Tip: Review your lease with your attorney before listing your business. If changes are needed, it’s easier to negotiate when you’re not under a closing deadline.

Ownership Disputes, Because Group Projects Never End Well

Remember those school group projects where one person did all the work and another tried to take the credit? Selling a business with unresolved ownership issues feels just like that… but with a few extra zeros on the line.

If your shareholder, partnership, or operating agreement is unclear — or worse, nonexistent — you could spend more time arguing over who signs the closing documents than actually closing the sale.

Pro Tip: Get all owners on the same page (and signed agreements) before the first buyer sees your business.

Missing Contracts, The Legal Equivalent of “I Swear I Had That Somewhere”

Employment agreements, vendor contracts, licensing paperwork — they all seem to hide in the same mysterious place as missing socks. Unfortunately, “I’ll get that to you later” doesn’t fly in due diligence.

Pro Tip: Gather, organize, and review your key documents before you go to market. Your attorney will love you, your broker will thank you, and your buyer will feel confident.

 Employment Law Issues , The HR Ghosts That Come Back to Haunt You

Misclassified employees, unpaid overtime, or unresolved HR complaints are like ghosts — they might be invisible to you now, but they’ll definitely show up when the buyer brings in their legal team. And unlike in the movies, you can’t just call Ghostbusters.

Pro Tip: Resolve disputes, review employee classifications, and ensure you’re compliant with labor laws before listing.

Risky Post-Closing Obligations, The “Surprise!” You Don’t Want

In the excitement of selling, some owners agree to indemnification clauses or warranties they barely understand. Later, they find themselves writing checks because of something that happened before the sale.

Pro Tip: Have your attorney explain every clause in plain English. “You could be liable” should never be a post-closing surprise.

Skipping the NDA, Giving Away the Recipe Before the Deal’s Done

Imagine sharing Grandma’s secret cookie recipe with a stranger… only to find them selling “Grandma’s Famous Cookies” down the street. Without a Non-Disclosure Agreement (NDA), you risk competitors, customers, or employees finding out your plans before you’re ready.

Pro Tip: Always require a signed NDA before sharing sensitive details. Your recipe — and your deal — will thank you.

Unresolved Liabilities, The Bill That Arrives After You’ve Moved Out

Outstanding taxes, pending lawsuits, unpaid vendor bills — these are the gifts that keep on giving… to the buyer’s attorney.

And here’s one many sellers forget: liens. Whether it’s a tax lien, UCC filing, or a vendor who secured payment with your business assets, every lien must be cleared before closing. Why? Because liens can delay a deal for weeks while everyone waits for payoff letters and releases.

Pro Tip: Work with your attorney and CPA to identify and settle liabilities and clear any liens before going to market. It’s much easier (and cheaper) to handle them on your terms than the buyer’s.

Selling your business is a once-in-a-lifetime event for most owners.

The legal pitfalls aren’t just fine print — they’re deal-makers or deal-breakers. At EDGE Business Advisors, we work closely with trusted attorneys to help you sidestep trouble, protect your interests, and close with confidence.

Thinking about selling? Let’s make sure your sale is more “champagne toast” and less “burnt turkey.”

Schedule your confidential consultation today.