Posted by Jennifer M. Settles, Esq. | June 11, 2026

7 Legal Mistakes That Derail a Business Sale at the Closing Table

 

You’ve found a buyer, agreed on a price, and signed a letter of intent. The hard part is over    . . .   right?  Not quite. Some of the most painful deal failures happen in the final stretch, when problems that were sitting in the background finally come to light. A sale that looked certain can stall or collapse at the closing table, often over issues that were entirely preventable.

Here are seven legal mistakes that derail business sales late in the process, and how to avoid them.

1. Treating the Letter of Intent as Harmless

Many sellers sign a letter of intent without reading it closely, assuming it’s just a formality. But an LOI can essentially lock in deal terms, impose an exclusivity period that bars you from talking to other buyers, and set expectations that are hard to walk back later. Provisions you glossed over in the LOI often resurface as binding commitments in your final deal documents. Treat the LOI as the foundation of the deal, not a warm-up, and have legal counsel review it before you sign.   Seeking to walk-back LOI terms – even those that are non-binding – can lead to distrust and hard feelings, and in some cases can tank a pending exit.

2. Letting Due Diligence Catch You Off Guard

When a buyer’s team starts digging, they will find your weak spots, such as missing contracts, lapsed filings, undocumented ownership, or unresolved disputes. If those surprises emerge during the buyer’s due diligence, they become leverage to renegotiate the price or, worse, reasons to walk away. The fix is to run a mock due diligence on yourself first – significantly before you commence your sale process. Identify and clean up problems months before a buyer ever sees them, so nothing turns up that you haven’t already addressed.

3. Ignoring Consent and Assignment Requirements

Your most valuable contracts (such as your key customer agreements, your commercial lease, supplier agreements, etc.) may contain clauses requiring third-party consent before they can be transferred to a new owner, or that let your contract counterparty terminate upon a sale. If you wait until closing to discover that your largest customer or your landlord must sign off, you can lose days or weeks chasing approvals while the deal loses momentum. Map out every consent the deal requires early, and develop a plan with your deal advisors on how to handle the approval process well before closing.

4. Fighting Over Reps, Warranties, and Indemnification Too Late

The representations and warranties you make, and what you agree to indemnify the buyer for, allocate risk between the parties – and they are frequently where deals get contentious. Sellers who don’t engage seriously with these provisions until the final stages of a pending exit often find themselves cornered into broad promises and open-ended liability. Understand what you’re being asked to stand behind, negotiate caps and time limits on your exposure, and resolve these points well before everyone is sitting at the closing table.

5. Overlooking the Working Capital Adjustment

Many deals include a post-closing adjustment based on the working capital delivered at closing versus an agreed target. A poorly defined working capital provision can effectively claw back a meaningful chunk of your purchase price after the deal is done. Sellers who don’t scrutinize how working capital is defined and calculated are sometimes blindsided by an adjustment they never saw coming. Nail down the definition (addressing cash and AR requirements,  inventory obsolescence, inventory identification and valuation, accounts payable, and work-in-progress allocations) and the target working capital number in the agreement, not in a dispute afterward.

6. Forgetting About Personal Guarantees

Over the years, many owners personally guarantee loans, leases, and lines of credit—and then forget about them. If you don’t account for these going into a sale, you can close the deal and still remain personally liable for obligations tied to a business you no longer own. Before closing, compile a complete list of every personal guarantee and make sure the deal documents, and your arrangements with those third parties, provide for your release from each one.

7. Skipping Experienced Deal Counsel

Perhaps the most expensive mistake is trying to save on legal fees by using a general practitioner, or no attorney at all, for a transaction with real complexity. Business sales involve interrelated legal, tax, and structural issues, and a misstep in any one of them can cost far more than the fees you saved by not hiring approximately.  Experienced M&A counsel anticipates the problems above before they become deal-killers. The right attorney doesn’t just paper the deal; rather, they protect its value all the way through closing and beyond.

The Bottom Line

The common threads running through every one of these mistakes are timing and planning. Problems that are cheap and easy to fix months in advance become expensive, stressful, and sometimes fatal to the deal when they surface at closing. The sellers who close smoothly while mitigating their risk are the ones who did the work early.

If you’re thinking about selling your business, the best protection against a closing-table surprise is preparation and the right team around you.    Contact the Law Office of Jennifer M. Settles to schedule a free consultation to talk through your pending exit.   Visit www.jsettleslaw.com or call (602) 617-3938.