- Organizing financial information, drafting a marketing summary, and presenting the business in a way that attracts credible buyers.
- A broker is generally not licensed or positioned to draft binding legal documents, give legal advice, or advise you on tax structuring — those are your lawyer's and accountant's roles,…
- A broker typically has a formal engagement agreement with one side of the transaction — usually the seller — even though they may deal directly with both buyer and seller throughout the…
A business broker can be a genuinely useful guide through the process of buying or selling a business — but the role is often misunderstood, especially by first-time sellers who assume a broker handles the entire transaction the way a real estate agent handles a home sale. It doesn't work quite the same way. This article sets out what a business broker typically covers, what falls outside that role, and why you still need your own lawyer regardless of how good your broker is.
What a Business Broker Typically Does
- Preparing the business for market. Organizing financial information, drafting a marketing summary, and presenting the business in a way that attracts credible buyers.
- Estimating an asking price. Brokers often provide an informal opinion of value based on their market experience, though this is not the same as a formal, independent business valuation.
- Finding and screening buyers or sellers. Marketing the opportunity confidentially, filtering out unserious inquiries, and confirming that prospective buyers have the means to actually complete a purchase.
- Facilitating negotiations. Helping both sides work toward agreed price and key terms, often through a letter of intent.
- Project-managing the timeline. Keeping the process moving between the letter of intent and the point where lawyers take over to draft and close the deal.
A good broker earns their keep primarily in the early and middle stages of a deal — sourcing the opportunity, shaping the initial terms, and keeping momentum.
What a Business Broker Does Not Do
| Task | Business Broker | Lawyer | Accountant |
|---|---|---|---|
| Market the business, find buyers | Yes | No | No |
| Give an informal price opinion | Often | No | Sometimes |
| Draft the purchase agreement | No | Yes | No |
| Structure the deal for tax purposes | No | Coordinates | Yes |
| Lead legal due diligence | No | Yes | Supports |
| Give legal advice on liability exposure | No | Yes | No |
| Prepare or review financial statements | No | No | Yes |
| Negotiate representations, warranties, indemnities | Limited | Yes | No |
A broker is generally not licensed or positioned to draft binding legal documents, give legal advice, or advise you on tax structuring — those are your lawyer's and accountant's roles, and skipping them because "the broker is handling it" is one of the more common mistakes first-time sellers make.
Who Does the Broker Actually Represent?
This is worth clarifying at the outset of any engagement, because it isn't always obvious. A broker typically has a formal engagement agreement with one side of the transaction — usually the seller — even though they may deal directly with both buyer and seller throughout the process. Before relying on anything a broker tells you, ask plainly who they are engaged by and what duties that engagement creates. If you're the buyer working with a seller's broker, remember that broker's job is ultimately to get the seller's business sold on good terms, not to protect your interests as the buyer.
Engagement Terms and Commission
Broker engagements are typically documented in a written listing or engagement agreement that sets out the scope of services, the length of the engagement, and how the broker is compensated. Commission structures and rates vary and are negotiated broker by broker — there is no fixed or standard rate set by law, so this is a term to review and negotiate directly with the broker rather than assume.
Why You Still Need Your Own Lawyer
Even with an excellent broker managing the process, the letter of intent and the eventual purchase agreement are legal documents that allocate real risk — liability for undisclosed problems, tax consequences, employee obligations, and what happens if something goes wrong after closing. A broker can help you get to a signed letter of intent; only a lawyer can properly protect your position in the definitive agreement that follows it.
Frequently asked questions
Do I legally need a broker to sell my business in Ontario?
No — there is no legal requirement to use a broker to buy or sell a business in Ontario. Many owners sell directly, through their own network, or with only a lawyer and accountant involved.
Can my broker also act as my lawyer?
No. A business broker and a lawyer are different professional roles with different training, licensing, and duties. Even a broker with legal training cannot act as your lawyer on your own transaction while also acting as the broker.
What should I look for in a broker engagement agreement?
Pay attention to the length of the engagement, whether it's exclusive, what happens if you find a buyer yourself during the engagement, and exactly how and when commission becomes payable. Have your lawyer review the engagement agreement before you sign it, not just the eventual purchase agreement.
Is a broker's price opinion the same as a business valuation?
Generally no. A broker's opinion is usually based on market experience and comparable listings, while a formal valuation is typically a more rigorous, independent analysis. If a bank, court, or tax authority needs a defensible number, a broker's opinion alone is often not sufficient.
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