Lessons Learned: The Importance of Legal Counsel in Buying an Accounting Practice
Buying an accounting practice can be a significant investment and a step towards building a successful business. But, as with any significant investment, it's essential to do your due diligence before making the purchase. This includes thoroughly researching the accounting practice's history, financials, and reputation. Unfortunately, one individual found out the hard way that failing to do so can lead to significant challenges down the road.
The client in question, who we'll call John, purchased an accounting practice without using a lawyer. John believed that he had done his due diligence and had thoroughly researched the practice. However, after taking over, he soon discovered that the previous accountant had been fabricating write-offs for clients.
As a result, John had to meet with each and every client for hours to explain the problems. This caused significant delays and client loss, as many clients were unhappy with the news and the potential legal and financial consequences they now faced. John was still paying off the ten-year accounting practice loan and, as a result, was under immense financial pressure.
One of the main reasons that John found himself in this situation was that he did not seek legal advice during the purchasing process. An experienced lawyer could have provided valuable guidance and assistance in conducting due diligence, ensuring that all necessary legal and financial documents were in order, and protecting John's interests throughout the process.
In the absence of legal counsel, John was left to deal with the aftermath of the previous accountant's misconduct on his own. While John's situation is unfortunate, it serves as a cautionary tale for anyone considering purchasing an accounting practice.
When purchasing an accounting practice, it's essential to engage the services of a lawyer with experience in mergers and acquisitions. A lawyer can help ensure that all necessary legal documents are in order, review the practice's financials, and assist with conducting due diligence.
Furthermore, a lawyer can help you negotiate favorable terms and conditions, including warranties and indemnities, that can protect you from any hidden liabilities that may arise after the purchase.
In conclusion, purchasing an accounting practice can be a great investment, but it's essential to do your due diligence and seek legal advice before making the purchase. Failing to do so can result in significant financial and legal consequences, as John unfortunately discovered. By taking the necessary precautions, you can minimize your risks and increase your chances of success. If you’d like legal help to protect yourself in your asset purchase, please contact Sara Sharp at sharp@skandslegal.com.
