Your broker may owe you no fiduciary duty at all

Whether your broker owes you a fiduciary duty depends on the label in the paperwork and on the law of your state. A true agent owes loyalty and disclosure. A statutory transaction broker owes a short list fixed by statute. Many intermediaries owe only what their own engagement letter says. Read the duty clause before you sign it.

Does a business broker owe a fiduciary duty to the seller?

A business broker owes a seller fiduciary duties only where the relationship is an agency relationship that no statute and no contract has cut down. Fiduciary duty means undivided loyalty to you, disclosure of what the broker knows, and no secret profit. Plenty of engagement letters describe something narrower, and the narrower version controls.

Three relationships hide behind the same word. The first is agency: the agent acts for you and must tell you what it learns that bears on your decision. The second is the statutory transaction broker, sometimes called a facilitator. Several states have written that role into their brokerage statutes, replacing the common law of agency with an enumerated list. Florida presumes a licensee is operating in that capacity unless a different relationship is established in writing. Colorado requires any obligation beyond its list to be put in a writing signed by the parties. The third is the contract intermediary, whose duties are whatever the engagement letter says.

Which box you are in is a state-law question before it is a contract question. Those transaction-broker statutes sit inside real estate licensing law, so whether one reaches your sale depends on your state and often on whether real property is in the deal. California’s licensing definition expressly reaches negotiating the sale of a business opportunity, and Illinois regulates business brokers separately.

Law: Fla. Stat. 475.278; Colo. Rev. Stat. 12-10-407; Cal. Bus. & Prof. Code 10131(a); 815 ILCS 307/10-10.

What is the difference between an agent, a transaction broker, and an intermediary?

An agent, a statutory transaction broker, and a contract intermediary differ in where their duties come from. Agency duties come from the common law and are broad. Transaction broker duties come from a state statute and are a closed list. Intermediary duties come from the engagement letter you sign and stop where that document stops.

The consequence is practical. If the letter says the firm is a non-agency intermediary giving no legal, tax or accounting advice, a later complaint that the broker should have flagged the tax cost of an asset sale runs into the clause you signed. I read the duties clause and the disclaimer clause before the marketing plan, because the marketing plan promises effort and the duties clause promises accountability.

Can the same firm represent the buyer and me at the same time?

Sometimes, and never silently. Some states prohibit dual agency outright and offer a transaction-broker or intermediary role instead. Where a form of both-sides representation is allowed, it takes written disclosure of who is represented and written consent obtained in advance. Federal law conditions the M&A broker registration exemption on those same two things.

Florida is the example of the prohibition. A licensee there may not operate as a disclosed or nondisclosed dual agent, which is why the transaction-broker presumption exists. Texas is the example of the permission, and the cleanest statement of what consent must contain: written consent from each party, stating the source of any expected compensation, with the intermediary required to act fairly and impartially.

Read the federal rule for what it is. It conditions an exemption from broker-dealer registration for brokers selling an eligible privately held company. It creates no duty to you and displaces no state requirement.

Law: 15 U.S.C. 78o(b)(13)(B)(vi); Fla. Stat. 475.278; Tex. Occ. Code 1101.559.

Cross-side compensation is broader than formal dual agency. The firm marketing your company may hold a buy-side mandate, collect a referral fee from the lender financing your buyer, or hope to be retained by the buyer after closing. None of that is automatically improper. All of it changes who the firm is trying to please. Ask in writing:

• Do you have a buy-side mandate, retained search or fee arrangement with any party that may bid on this company?
• Will you receive any payment, referral fee or reimbursement from the buyer, the buyer’s lender or a diligence provider?
• Do you expect to be engaged by the buyer after closing for any purpose?
• Are you acting as my agent, as a statutory transaction broker or as a non-agency intermediary, and under which statute?

If your buyer finances the purchase with an SBA 7(a) loan, some of this surfaces on its own. Compensation paid by the loan applicant or the lender to an agent in connection with the loan is disclosed on SBA Form 159, which the agent and applicant sign and the lender certifies, and the applicant is told no agent is required. Whether the commission you pay your own broker belongs on that form turns on who the broker served and who paid. Ask the lender early.

Reference: SBA Form 159 (Fee Disclosure Form and Compensation Agreement); SBA SOP 50 10 8, effective June 1, 2025. Confirm the current version.

The consent form is not a formality. It is the one document where the law makes the firm say out loud who else is paying it.

How does the broker’s fee structure change the advice I get?

A success fee earned only at closing rewards closing. That alignment mostly works in your favor, because you also want a closing. The distortion appears when the fee curve barely steps with price, which quietly rewards speed over price, and when the person advising you on whether to accept a reduced number is paid nothing if you walk.

So ask what event triggers the fee, and how it is calculated when part of your price arrives as an earnout or a seller note. A fee measured on headline value and paid at closing is indifferent to whether the deferred piece arrives.

Are my emails with my broker privileged?

Emails between you and your business broker are not privileged. Attorney-client privilege covers confidential communications with a lawyer for the purpose of legal advice, and no comparable broker privilege exists. Federal law recognizes no general accountant-client privilege either, outside one narrow tax statute. Your candid message is an ordinary business record.

Ordinary business records get produced when they are relevant to a claim or defense and proportional to the needs of the case. One narrow path puts a broker’s work inside privilege, where your lawyer engages the broker to help the lawyer advise you. Do not plan around it.

Picture the two emails every seller sends. One says the second-largest customer has been quiet since spring. The other says the owner-compensation add-back is aggressive but defensible. Both are honest, and both sit dated and attributable on a broker’s server. The deal closes, the customer leaves, earnings miss the model, and the buyer pleads fraud alongside its indemnification claim to reach past the contractual limits. It subpoenas the broker’s file, and your email lands beside the customer representation in the purchase agreement.

Waiver is the second half of the problem. Copy your broker on an email from your lawyer analyzing a weak indemnity position and you have shared it with a third party, putting at risk the confidentiality that made it privileged.

The broker is not your lawyer. Nothing you send the broker is privileged. Everything you send the broker is potentially evidence.

Law: Couch v. United States, 409 U.S. 322 (1973); Fed. R. Civ. P. 26(b)(1).

Does the tax practitioner privilege protect what I tell my accountant?

Section 7525 of the Internal Revenue Code extends the common law protections of confidentiality that apply between a taxpayer and an attorney to tax advice communications between a taxpayer and a federally authorized tax practitioner. Congress added it in 1998. The protection is real, and narrow in exactly the way that matters to a seller.

The statute limits where the privilege can be asserted. It reaches noncriminal tax matters before the Internal Revenue Service and noncriminal tax proceedings in federal court brought by or against the United States, and not written communications promoting participation in a tax shelter. As of September 2026, that is the scope of the section.

Apply that to the fight you are likely to have. A buyer suing you after closing over a soft add-back is not the IRS, and that case is not a federal tax proceeding brought by or against the United States. Section 7525 does nothing there, and your CPA’s memo on normalizing adjustments is discoverable.

Law: 26 U.S.C. 7525.

What is a Kovel arrangement and when do I set one up?

A Kovel arrangement is one in which the lawyer, not the client, engages the accountant, so the accountant’s work supports the lawyer’s legal advice and can fall inside the attorney-client privilege. Put it in place before any candid analysis is written, because the protection runs forward from the engagement and never backward.

The name comes from a 1961 federal appellate decision holding that an accountant assisting a lawyer in understanding a client’s information can be covered by the privilege. Courts read it narrowly, and the arrangement is a deliberate choice, not standard practice on every sale.

Law: United States v. Kovel, 296 F.2d 918 (2d Cir. 1961).

The mechanics matter. Counsel signs the engagement letter with the accounting firm, the scope describes work performed to enable counsel to advise you, and the analysis goes to counsel rather than the broker. Ordinary work, such as preparing returns, stays on the accountant’s regular engagement, because the privilege turns on the purpose of the work and not the letterhead.

Timing is the whole game. A letter signed in March does nothing for an email you wrote in January. Set it up before any quality-of-earnings work begins and before anyone writes down a candid view of the add-backs. I ask who is on the engagement letter and who receives the analysis before I ask what the analysis says.

What happens to my privileged deal file after closing?

Privileged files can change hands at closing, and structure decides it. In a merger of Delaware corporations, the Court of Chancery has held that all privileges of the constituent corporation, including privilege over pre-merger communications, pass to the surviving corporation under the merger statute unless the merger agreement provides otherwise. The buyer then holds the privilege over your negotiations.

Law: Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155 (Del. Ch. 2013); 8 Del. C. 259.

Do not assume that rule fits your deal. Sales of this size are frequently asset sales, where the selling entity keeps its own files unless the agreement hands them over. Where the entity itself is bought or merged, the Delaware default is the one to plan against. Read the structure in the first article of the purchase agreement.

Two consequences follow. If the entity is changing hands, the purchase agreement needs an express provision retaining pre-closing privileged communications with deal counsel for the seller side, and it is easiest to get early, when it reads as housekeeping. Either way, keep deal correspondence out of the company email accounts you are selling. A carve-out does not un-send a message from an address the buyer owns Monday.

What should I do before I sign the engagement letter?

Three steps do most of the work, and all of them happen before the company is on the market. Read the duties and disclosure clauses in the engagement letter. Ask in writing who else is paying the intermediary on this transaction. Move the sensitive analysis off the group email thread and route it through counsel.

• Find the sentence that describes the relationship. Confirm whether it says agent, transaction broker, facilitator or intermediary, and check that word against your state’s statute.
• Find the disclaimer of legal, tax and accounting advice. Those judgments are yours to source elsewhere.
• Send the compensation questions above by email and file the reply.
• If the firm asks you to consent to working both sides, require disclosure and consent in writing beforehand, and confirm your state allows it.
• Write every deal email as though the buyer’s litigation counsel will read it aloud in a deposition.

A broker who is not your fiduciary is not your enemy. A good intermediary earns the fee by bringing buyers you would never have found. The mistake is not hiring one. It is assuming a duty the document does not contain, then writing emails as if someone had to protect them.