I was recently retained by a New Orleans business owner to help him apply for some city permits. In the process of reviewing his paperwork, I learned that he had purchased this business from another business owner over a year ago, and that he had done so without the help of an attorney or accountant. The other business owner had an attorney and an accountant on retainer. My client had assumed everything would be OK. At the time, it was.
His business operated for about a year with no issues at all. Sales were picking up, employees were happy with the new ownership, and the owner was happy with his new purchase.
After reviewing the paperwork for the business, it became clear that the sales documents were drafted very much in favor of the seller. It was worrisome because the paperwork was so skewed that it was possible that the city would deny my client the permits he needed to successfully operate his business. We were a bit worried, so we decided to have an accountant look at the sale.
Not only was the paperwork out of order, but the accountant discovered that the seller may have left our client with a significant tax burden (well over six figures). This was not what the buyer or the seller intended in this sale, and it was definitely a surprise to the purchaser.
Luckily, everyone was on friendly terms. We were able to work with all the parties to ensure that the proper documentation was signed to ensure that the sale was as the parties envisioned. In addition, we protected our client from a six-figure tax burden.
The lesson learned here is that accountants and lawyers aren’t replacements for each other. When running your business, each has their own place, and when they work together, they can help you spot trouble and keep your business running smoothly.