Over the past several months, the attorneys at A Business Law Firm have handled an increasing number of stock sales, membership sales, and asset sales. A trend has emerged that’s raising red flags: individuals relying solelyon artificial intelligence (AI) instead of legal counsel to navigate complex transactions.
The appeal of AI is understandable and we applaud how it has streamlined and simplified so much of everyone’s daily lives. It’s fast, accessible, and in many cases, can generate templates that resemble that include many terms seen in a document drafted by an attorney. But when it comes to selling a business, whether it’s a partial membership interest, asset sale, or full transfer of ownership, using AI in place of an attorney is a risky move that can cost far more in the long run.
There’s a common misconception that the attorney’s role in a business sale is limited to “drafting paperwork.” In reality, legal counsel plays a critical role in identifying what documents are needed, when they’re needed, and what protections must be included to ensure a successful, enforceable transaction.
For example:
- Is a non compete agreement appropriate, and enforceable, in this situation?
- Should a promissory note be included, and if so, does it need to be recorded?
- Have the parties signed a non-disclosure agreement (NDA) or letter of intent (LOI)?
- Is there going to be a holdback amount, if so what are the events that will trigger its application?
These are not one-size-fits-all questions, and they cannot be answered reliably by a generic AI prompt, such as “draft a purchase agreement for the sale of 100% membership interest in an LLC.”
In fact, many deals are initiated without even the most basic legal safeguards in place, such as an NDA to protect confidential business information during negotiations. Skipping those early steps can create serious liability down the line. Similarly, omitting or miswriting terms like payment structures, representations and warranties, or dispute resolution clauses can turn what seems like a simple sale into years of litigation. Our design is to work with the client to understand and predict as many possible concerns and situations that could arise regarding the sale, and then draft a contract that addresses those concerns. A well drafted purchase agreement is the result of true partnership between the attorney and the client.
And here’s another important distinction: AI cannot be held accountable.
If an agreement generated by AI turns out to be void, unenforceable, or missing key provisions, there is no recourse. AI platforms do not carry malpractice insurance. They are not licensed professionals. In the event of a dispute, an invalid or incomplete contract could leave parties exposed, with no one to answer for it.
By contrast, licensed attorneys are professionally obligated to protect their clients’ interests. They are trained to anticipate legal pitfalls, ensure compliance with state and federal laws, and prepare contracts that are valid, enforceable, and strategically sound. Attorneys also carry professional liability insurance, offering an added layer of protection that AI cannot provide.
AI can be a helpful tool for organizing information, generating checklists, or summarizing documents. But it is no substitute for experienced legal guidance when a business owner is preparing to sell their company or assets.
The sale of a business is often one of the most significant financial and legal decisions an entrepreneur will make, as such a sale is often funds that entrepreneur’s retirement or is their generational legacy. It deserves thorough, informed, and personalized legal support.
Thinking of buying or selling a business?
The attorneys at A Business Law Firm in Spartanburg, SC, are here to help. From drafting NDAs to guiding you through closing, we provide strategic legal advice every step of the way.
Call 864-699-9801 Learn more: ABizLaw.com
