Lawyer's Fees for the Sale of a Business (Fonds de Commerce)

Selling or buying a business as a going concern (fonds de commerce) is never a mere signature. Between checking the seller's figures, drafting a deed that commits the parties for several years and securing the price during the creditors' opposition period, the transaction involves legal work that many underestimate when asking for a quotation. The question of lawyer's fees for the sale of a business (fonds de commerce) therefore comes up systematically, often framed the wrong way round: "how much does it cost?" before even knowing what the lawyer actually does. This article sets out what these fees concretely cover (audit, drafting, escrow) and explains how to choose between a fixed fee and hourly billing depending on the complexity of the matter.

What the lawyer's involvement actually covers

Paying a French lawyer (avocat) for the sale of a business is not paying for a document. It is paying for a chain of tasks that begins well before signing and continues after it. Three blocks structure the engagement and explain most of the cost.

The preliminary audit, or due diligence

Before any drafting, the lawyer checks the reality of what is being sold. On the buyer's side, this audit phase (often called due diligence) consists in examining the accounts for the last three financial years, the nature and term of the commercial lease, the transferred employment contracts, the licences and administrative authorisations attached to the business, the state of the stock, any pledges (nantissements) registered on the business and the existence of ongoing disputes.

A concrete example: for the takeover of a restaurant, the lawyer checks the Licence IV (on-premises alcohol licence), compliance with hygiene standards, compliance with the lease clauses on permitted use of the premises and the existence of a terrace right. For a bakery, the lawyer checks the franchise or supply contracts and whether the equipment can be transferred. This phase determines the price and the warranties: it is what explains why an apparently simple matter reveals hidden risks and therefore more hours of work.

On the seller's side, the lawyer prepares the documentation, secures the statements made to the buyer and anticipates warranty claims. A botched audit is paid for later, in litigation.

Drafting the deeds

The visible core of the engagement remains the drafting. The deed of sale of a business is not a form: it is a tailor-made contract that must list precisely the items transferred (goodwill, shop sign, trade name, leasehold right (droit au bail), equipment, goods), fix the price by category of items, organise the conditions precedent and provide for the seller's warranties.

The lawyer also drafts the documents that revolve around the sale: the promise of sale or preliminary agreement (compromis), the escrow agreement, the non-competition and non-re-establishment clause, the asset and liability warranty clause where the transaction justifies it, as well as notification letters and publicity formalities. The deed countersigned by a lawyer, provided for by Article 1374 of the French Civil Code, gives the document enhanced evidential value: the lawyer certifies having fully advised the parties on the legal consequences of their undertaking.

The quality of this drafting is measured by what it avoids: a poorly calibrated non-competition clause may be annulled for lack of limitation in time or space, and an imprecise allocation of the price may distort the calculation of registration duties.

Escrow of the funds

This is the part that the seller overlooks until it concerns them directly. The sale price is not paid to the seller on the day of signing. It is held by an escrow agent (séquestre), often the drafting lawyer or a notary, while the statutory periods protecting creditors and the tax authorities run.

Publication of the sale opens a ten-day period for the seller's creditors to lodge an opposition. In addition there is the tax joint liability under Article 1684 of the French General Tax Code: the buyer may be held jointly liable for payment of the income tax owed by the seller for a period which, provided the profit return is filed on time, is reduced to ninety days. In practical terms, the price remains unavailable for several months, often three to five months depending on the steps taken.

Handling this escrow engages the lawyer's liability: the lawyer keeps the funds in a dedicated account, checks that no opposition has been lodged, obtains the tax and social security certificates, then releases the price. This trusted third party role is an integral part of the service and is reflected in the fees. How this escrow works and how it fits with the asset and liability warranty are set out in our article on escrow of the price in the sale of a business.

How lawyers' fees are set

In France, lawyers' fees are freely agreed. Article 10 of Law No. 71-1130 of 31 December 1971 reforming certain judicial and legal professions lays down this principle: the remuneration is fixed in agreement with the client, taking into account in particular the difficulty of the matter, the time spent, the lawyer's reputation and the client's financial situation.

Since the law of 6 August 2015, a written fee agreement (convention d'honoraires) is mandatory, except in cases of urgency or force majeure. For the sale of a business, this agreement must be signed before the engagement starts and must specify the method of calculation chosen, the exact scope of the services covered and the treatment of ancillary costs. A clear quotation avoids the main cause of dispute between lawyer and client: disagreement after the event about what was included or not.

The agreement must also state whether the lawyer bills separately for the escrow role, the negotiation phase, or the drafting of additional documents such as an asset and liability warranty. A reader comparing two quotations must first compare the scopes before comparing the amounts.

Fixed fee or hourly rate: choosing according to complexity

The choice of billing method is the real subject. It does not depend on a preference, but on the nature of the matter.

The fixed fee, for transactions that are easy to read

A fixed fee consists in agreeing a single global price for the whole engagement. It is reassuring because it caps the cost and makes it predictable. It suits sales whose scope is stable and identifiable from the outset: a local shop sold to a single buyer, with a sound lease, no employees or a small workforce, no ongoing dispute and no complex structure.

The typical example: the sale of a hairdressing salon run as a sole trader, with no litigation, with a standard commercial lease. The lawyer can gauge the volume of work from the outset and can commit to a global amount covering the light audit, the drafting of the deed, the publicity formalities and the escrow.

The limit of the fixed fee appears when the unforeseen arises. If the negotiation drags on, if a creditor lodges an opposition, if an asset and liability warranty clause has to be added along the way, the agreement must have provided for these scenarios, failing which the lawyer will work beyond what has been billed or will have to renegotiate.

The hourly rate, for matters of variable scope

Billing for time spent is necessary where the volume of work cannot be anticipated. This is the case for sales with a high degree of uncertainty: several competing buyers, a long negotiation on price and warranties, heavy employment liabilities, pre-existing litigation, an administrative authorisation to be obtained, or a transaction carried out when the business is in difficulty.

The hourly rate varies according to the lawyer's experience and the location of the firm. Its advantage is that it charges for the work actually done, no more and no less. Its drawback is the absence of a cap: a matter that goes off course can be expensive. Good practice is to pair the hourly rate with an initial estimate of the number of hours and a checkpoint as soon as that volume is reached, which gives the client visibility again.

In practice, many firms combine the two: a fixed fee for the predictable part (drafting and formalities) and an hourly rate for the uncertain part (negotiation, handling of oppositions, emerging disputes).

The supplementary success fee

A third mechanism exists: the supplementary success fee (honoraire complémentaire de résultat), calculated according to the result obtained, in addition to a base fee. Article 10 of the Law of 31 December 1971 permits it on condition that it is added to a fixed fee: remuneration calculated exclusively on the result, the pacte de quota litis (contingency fee agreement), remains prohibited.

This success fee is found mainly in litigation, less in pure drafting work. It calls for particular vigilance in sales taking place in a judicial setting: where a business is sold as part of collective insolvency proceedings (procédure collective), Annex 8-5 of the French Commercial Code recalls that the sale of the company's assets requires an order of the supervising judge (juge-commissaire) authorising the sale and setting its terms, and that the supplementary success fee may then be subject to prior judicial authorisation.

Business assets or company shares: a choice that affects the fees

Many clients confuse two very different transactions, and this confusion has a direct impact on cost.

Selling a business (fonds de commerce) means transferring the operating assets (goodwill, shop sign, equipment, leasehold right) without transferring the company that runs it. Selling the company shares (parts sociales) or the shares in a joint-stock company means transferring the company itself, with its assets and liabilities. The steps and risks specific to each of these two routes to a takeover are set out in our complete guide to taking over a business.

The legal regime differs and so does the lawyer's work. The transfer of company shares must be evidenced in writing, as Article 1865 of the French Civil Code recalls, and can be relied on against third parties only once the formalities have been completed and the transfer has been published in the Trade and Companies Register. The approval of the partners is frequently required: Article 1861 of the French Civil Code provides that the proposed transfer is notified, with a request for approval, to the company and to each of the partners, which adds a formal stage.

Some share transfers are subject to enhanced formalities. Article 1865-1 of the French Civil Code requires, on pain of nullity, that the transfer of shares of a legal entity that is predominantly property-holding (personne morale à prépondérance immobilière), within the meaning of 2° of I of Article 726 of the French General Tax Code, be evidenced by a notarial deed, by a deed countersigned by a lawyer within the meaning of Article 1374, or, where the accountant is legally authorised to do so, by a deed drawn up by a chartered accountant. A company holding significant real estate therefore makes the lawyer's work more technical, and the fee reflects this.

As regards warranties, a share transfer almost always calls for an asset and liability warranty agreement: the buyer takes on the company's liabilities, including its hidden debts. This drafting is time-consuming and pushes up the fees compared with a sale of a business, where the buyer in principle takes over only the items described in the deed.

What makes the amount of the fees vary

For a comparable service, two business sale matters do not cost the same. Several factors explain the difference:

• the value of the business, which raises the stakes and therefore the level of warranty required
• the existence of employees, whose contracts are transferred automatically and whose position must be organised
• the state of the commercial lease, a lease being renewed or containing contentious clauses adding to the workload
• the presence of pledges or liens registered on the business, which must be cleared
• the existence of ongoing litigation or of a tax or social security audit
• the negotiated nature of the transaction, a tight negotiation between several candidate buyers multiplying the versions of the deeds

A serious firm makes an initial assessment before quoting. Being offered a fixed fee without preliminary questions about the lease, the workforce and any disputes is a warning sign: it means that the unforeseen has not been factored in. The same approach to pricing applied to another document is examined in our article on fees for drafting a commercial lease.

Costs to be distinguished from fees

Fees remunerate the lawyer's work. They are not to be confused with the costs and taxes generated by the transaction, which must be budgeted separately and clearly identified in the agreement.

The registration duties payable by the buyer follow a statutory scale set by Article 719 of the French General Tax Code: no tax up to €23,000, a rate of 3% on the portion of the price between €23,000 and €200,000, and a rate of 5% above €200,000. These duties are not fees: they are paid over to the State.

In addition there are the costs of legal publicity (a notice in a legal notices publication and publication in the BODACC, the French official gazette of civil and commercial announcements) and the costs of formalities with the registry (greffe). These costs are modest in relation to the transaction, but overlooking them distorts the comparison between two quotations. An "all-inclusive" quotation that includes these costs appears more expensive than one that excludes them, even though the service may be identical.

Conclusion

Comparing lawyer's fees for the sale of a business on the displayed amount alone is a mistake. What matters is the scope: a low fixed fee that excludes a proper audit, the handling of the escrow or the drafting of the warranties costs more in the end than higher fees covering the whole chain. The position is clear: a fixed fee is worthwhile only for sales that are straightforward and well-defined, whereas uncertain transactions, share transfers and matters involving employment liabilities or litigation justify billing for time spent, framed by an initial estimate.

Before signing, require a written fee agreement that details item by item what is covered, distinguishes fees from registration duties and publicity costs, and states how the unforeseen will be billed. It is this document, more than the overall figure, that genuinely protects both the seller and the buyer.

Frequently asked questions

How much does a lawyer's fee for the sale of a business cost?

There is no statutory scale: fees are freely agreed under Article 10 of Law No. 71-1130 of 31 December 1971. The amount depends on the billing method (fixed fee or hourly rate), the value of the business, the presence of employees, the state of the lease and the complexity of the negotiation. A simple sale of a small shop with no employees is at a markedly lower level than a negotiated sale involving employment liabilities and warranties. Only a written fee agreement, drawn up after an initial assessment of the matter, makes it possible to obtain a reliable estimate.

Is a fixed fee always more advantageous than an hourly rate?

No. A fixed fee is attractive for predictable transactions whose scope is stable from the outset. As soon as there is uncertainty, several buyers, a long negotiation, creditors' oppositions, latent disputes, the hourly rate better reflects the work actually done. A fixed fee that is too low often hides exclusions (summary audit, escrow billed separately) that increase the final bill. The best protection remains a quotation that specifies what the fixed fee covers and what triggers additional billing.

Is the handling of the escrow included in the fees?

It depends on the agreement. The escrow of the price consists in holding the funds during the statutory periods, in particular the ten-day period for creditors' oppositions and the tax joint liability period under Article 1684 of the French General Tax Code, reduced to ninety days if the profit return is filed on time. This trusted third party role engages the lawyer's liability and forms part of the service where it is provided for. It must be checked expressly whether it is included in the fixed fee or billed separately.

Do fees differ between the sale of a business and the sale of company shares?

Yes, and often markedly. The transfer of company shares, governed in particular by Articles 1865 and 1861 of the French Civil Code, frequently requires an approval procedure and almost always an asset and liability warranty agreement, because the buyer takes on the company's liabilities. This drafting is longer and more technical than a deed of sale of a business. Where the company is predominantly property-holding, Article 1865-1 of the French Civil Code also imposes enhanced formalities, which further increases the work and therefore the fees.

Is a written fee agreement mandatory?

Yes. Since the law of 6 August 2015, the lawyer must draw up a written fee agreement, except in cases of urgency or force majeure. For the sale of a business, it must be signed before the engagement begins and must specify the method of calculation, the scope of the services and the treatment of ancillary costs. A client who is not offered a written agreement should ask for one: it is the main tool for preventing fee disputes.

Can a lawyer ask for a success fee on the sale?

A supplementary success fee is permitted by Article 10 of the Law of 31 December 1971, provided that it is added to a base fee. A fee fixed exclusively on the result, the pacte de quota litis, is prohibited. This mechanism is more common in litigation than in drafting. In a sale carried out as part of collective insolvency proceedings, Annex 8-5 of the French Commercial Code recalls that such a fee may be subject to prior judicial authorisation, the sale requiring an order of the supervising judge.

Are registration duties included in the lawyer's fees?

No. Registration duties are a tax payable by the buyer and paid over to the State, separate from the lawyer's remuneration. The scale is set by Article 719 of the French General Tax Code: nothing up to €23,000, 3% from €23,000 to €200,000, 5% above. Legal publicity and registry costs are added to these. A comparison of quotations makes sense only if fees are clearly distinguished from these costs and taxes.