VIRGINIA UPL OPINION 61
Completion of Legal Documents by Agent of Business Broker.
A business broker engages independent agents to find suitable sellers and buyers for the sale and purchase of businesses. The agents accept listings of businesses similar to real estate listings accepted by real estate agents. The agents prepare the sale and purchase agreement by filling out a form furnished by the broker for the parties to sign. Forms of bills of sale, promissory notes, closing statements and other closing documents are usually prepared by a “closing attorney??? and may be submitted to counsel for the seller and the buyer, if any, for their review. The closing attorney is furnished forms of closing documents by the broker which are used by other brokers in other states and are modified by the closing attorney for use in Virginia. The agents prepare and send bulk sale notices in connection with the sale of the assets of a business.
The closing attorney acts as counsel for the business broker and his fee is paid jointly by the seller and buyer. The closing attorney’s fee is a flat fee which escalates based upon the purchase price.
Under this factual situation, is the closing attorney improperly assisting the broker in the unauthorized practice of law?
In the case of Commonwealth v. Jones & Robins, 186 Va. 30 (1947), the Supreme Court of Virginia held that:
Specifically the relation of attorney and client exists, and one is deemed to be practicing law whenever — (2) one, other than as a regular employee, acting for his employer, undertakes, with or without compensation, to prepare for another legal instruments of any character, other than notices or contracts incident to the regular course of conducting a licensed business.
The Virginia Code has licensing requirements for real estate brokers and stock brokers and thus they would be clearly entitled under the Jones & Robins decision to prepare such documents as are described in the inquiry. The Code, however, does not contain a similar requirement for business brokers. Although there is a Business Opportunity Sales Act, Section 59.1-263, Code, this statute excludes the sale of an ongoing business from the definition of “business opportunity.??? Because there is no licensing requirement for business brokers, the broker described in this inquiry cannot prepare the sale and purchase agreements without being in violation of the Supreme Courtís holding in Jones & Robins. As a preparer of the bills of sale, the closing attorney would be assisting the broker in his unauthorized practice.
It is the unauthorized practice of law for a business broker, individually or through his agents, to prepare sale and purchase agreements for the sale and purchase of an ongoing business. An attorney who represents the business broker as closing attorney in connection with the sale would be furthering the unauthorized practice of law.
Of Virginia, January 18, 1985
Effective April 1, 1985 Updated: Aug 28, 2006