Episode 1329: Legal Mistakes Business Owners Make with Joe Prencipe

One flawed assumption in a high-stakes deal can turn an exciting opportunity into an expensive legal problem. In this episode of Sharkpreneur, Seth Greene interviews Joe Prencipe, Managing Partner of Prencipe International, who discusses the legal risks business owners face when buying, selling, and scaling companies. Joe explains why due diligence, buyer vetting, strong contracts, experienced legal counsel, and careful negotiation are critical when significant money is at stake. He also explains how litigation often hinges on leverage and psychology, and why entrepreneurs need to rethink legal protection as their businesses grow. Key Takeaways: → High-stakes transactions require more scrutiny than routine business decisions. → Buyers can get into serious trouble when excitement replaces proper due diligence. → Sellers should thoroughly vet a buyer’s finances and ability to close. → Requesting proof of funds and financial information is a normal part of protecting a deal. → Litigation often involves leverage, psychology, and an understanding of the other side’s weaknesses. Joe Prencipe is a top-ranked international attorney with 19 years of experience and the Managing Partner at Prencipe International. He began his career in Tokyo at Freshfields Bruckhaus Deringer LLP and later practiced at Baker McKenzie LLP. He has also worked with the U. S. S. E. C. Division of Enforcement and the Seattle City Attorney’s Office, and has served as legal counsel at Virgin Hyperloop One. Joe has built and sold two technology businesses and currently owns multiple businesses, including Westport Winery. He advises business owners and high-net-worth individuals on major transactions, litigation, M&A, and strategic legal matters. Connect With Joe: Website: https://prencipe.com/ LinkedIn: https://www.linkedin.com/in/joeprencipe/

• 0:00Speaker 00

  Welcome to the Sharkpreneur Podcast with Kevin Harrington and Seth Green. Kevin Harrington is the inventor of the infomercial, one of the original sharks from the hit TV show Shark Tank, and has generated over $5 billion in TV and digital direct response sales. Seth Green is the world's first trusted authority on cutting-edge direct response marketing, a bestselling author, and the only three-time marketer of the year nominee. On the podcast, Kevin and Seth interview sharkpreneurs who share straight talk on what it takes to explode your business.

• 0:38Speaker 01

  Forty-nine faces looked to him in triumph. Over the last 12 months, they had each taken turns and promoted his business for a week at a time, driving over $987,342 in revenue. What if you had a network of 50 centers of influence who promoted your business every week for a year? Grab your copy of the number one Amazon bestselling book, The Ultimate Guide to Growing Your Business with a Podcast. It's 33% off the Amazon price by going to ultimatenpodcastbook.com. Again, that website for 33% off the Amazon price is ultimatenpodcastbook.com. Welcome to the podcast. This is your host, Seth Green. Today, I've got the good force to be with Joe Prencipe, founder of Prencipe International. Joe, thanks so much for joining us.

• 1:19Speaker 02

  Hey, thank you so much for having me, Seth. I look forward to talking with you here today about all sorts of things to make sure that people who are business owners and growing their business rapidly know what the heck they're doing when it comes to big legal decisions.

• 1:34Speaker 01

  Awesome. That's exactly what we want to talk about. Let's go back in time just a little bit. What inspired you to become a lawyer in the first place?

• 1:41Speaker 02

  Oh, literally, it was the classic, like, my dad told me to be a lawyer. It's kind of funny, too. That would have made sense 30 years ago, but I was programming, and he was like, be a lawyer. And now, they're two combining together with Claude and legal. It's all becoming one.

• 1:58Speaker 01

  Okay. And tell us a little bit about kind of the journey from when you became a lawyer to how you arrived at the, I mean, I think you worked at some of the biggest law firms in the world. You clerked at the SEC. Kind of take us through the journey a little bit.

• 2:12Speaker 02

  Yeah, sure. No, absolutely. I really wanted to do litigation, went to law school where I'm from, up at Washington, University of Washington, University of Washington School of Law. And at the end of the day, I happened to, I learned Japanese. I was doing recruiting jobs in Tokyo. I get a job at a top American firm, and this partner laterals to the leader of the magic circle of international law firms in the world, Freshfields, Bruckhaus, Deringer. And suddenly, myself, as a West Coast American, finds myself working with, you know, Oxford and Cambridge honors-only grads. I'm the only American in the whole firm base. I think there was one other one. And it was a wonderful experience.

• 2:52Speaker 02

  From there, I worked at other top firms, well, one before and one after as a clerk before, and went on to build and sell two businesses, and then went on to set up my own boutique law firm.

• 3:06Speaker 01

  All right. So let's talk about Prencipe International. What are you helping business owners with?

• 3:11Speaker 02

  Yeah, absolutely. So we deal with high-stakes transactions. We don't deal with small things, like if you need your incorporation, you can have AI do that for you. We deal with stuff when the money is actually on the line, and you need the smartest attorney, again, literally attorneys, our attorneys only work at the top international law firms in the world. When you need that level of caliber, because you're doing a million-dollar-plus transaction, what does that mean? That means, hey, if you know, you're growing your first business, or maybe your second one, you're finally making a lot of money, one $10 million a year, and now you're suddenly in a $5 million lawsuit for the first time, and you have no idea what you're doing, and you're in the pool with sharks, and your old schools of thinking that, you know, you

• 3:54Speaker 02

  can think on your feet, you think you know what you know, all that knowledge goes away quickly. What you need in your corner is an expert, the smartest frickin' attorney you can find to sell lawsuits, and then big transactions, like if you're selling your business, if you're doing a big, you know, $5 million, that's very tiny for us, right, in the big law world, but if you're doing a $5 million transaction, do not AI it. I have a really wealthy client that almost just did that the other day, and I had to chastise him, like, you're an absolute moron if you're dealing with million-dollar transactions and don't pay a lawyer 10 grand. You're a frickin' idiot, and you deserve to have everything taken from you, and that's what will happen.

• 4:35Speaker 01

  What is the biggest misconception business owners have when it comes to, like, buying and acquiring another business?

• 4:41Speaker 02

  Yeah. Oh, my gosh, there's so many. So for buying another business, it's very common, because you're not an M&A, mergers and acquisitions expert, what ends up happening is first-time business buyers start to say to themselves, oh, I'm so excited, here's all these things I can do with this business, oh, the books look fine, I like the seller, let's do it. That's like buying a 30-year-old used car and not even trying to listen to how the engine is running. It's just the stupidest thing you could do. So it's a big misconception that people, to sum that up, basically, people get excited, don't know anything about buying a business, they end up buying a lawsuit, and I'm okay with that, because they hire me to do the lawsuits, too.

• 5:22Speaker 02

  So we always say lawyers are the only ones that win in bankruptcies and litigation. Now, for sellers, it's a different scenario, but let me throw the mic back to you, Seth.

• 5:32Speaker 01

  How often do buyers discover doing due diligence that the business isn't quite what they thought they were buying?

• 5:40Speaker 02

  I'll say maybe 60% of the time. It depends on the deal size. The larger the deal get, the more deals get, the more sophisticated the parties, the less likely the issues. But also, otherwise, you know, another point is that the larger the businesses get, the more that there is going on, and so there's going to be lawsuits. You're going to find those. There's going to be issues here and there, personnel issues, you're going to find those just because that's the nature of a large business. Most importantly, though, when buying a business is undisclosed issues. Like, if you buy a, we deal with this all the time, if you buy a business for $5, $10 million, the seller might not know certain things, and he doesn't tell you, and these

• 6:21Speaker 02

  one or two things could make, like, maybe a recent price increase for his, for certain items, inputs for his product, and maybe he's just, you know, you're just about to close, this happened earlier this year in one of my cases, price increase just a month before close, the seller wasn't really all over it. The seller's already checked out on vacation. They're selling their business. Buyer buys a bankrupt business, very common.

• 6:46Speaker 01

  When I'm buying a business, whose interests on the team is actually obligated to protect me?

• 6:53Speaker 02

  Yeah. I mean, so that's the thing, is what a lot of buyers and sellers don't know, and only, only, you know, again, highly experienced, sophisticated businessmen know is, you need to have a shark-level attorney who's watching your back and telling you what to say and making sure you don't fudge up, because at the end of the day, the people on the other side of the table are just, you know, they're reading everything you're doing, they're looking for every opportunity to take advantage of you, and you might not understand that, because, again, you haven't dealt with, you know, big $100 million New York cases.

• 7:26Speaker 01

  Most entrepreneurs probably think a letter of intent is a first draft. Why do you think that's a dangerous assumption?

• 7:32Speaker 02

  Yeah, it's fun. You're talking to the guy you're doing the deal with on the other side, whether it's a business sale or just a big transaction, you're having a good time, you're getting along, you're thinking to yourself, well, here's, here's some good terms, let's put that in paper, let's, let's make a deal out of that. What you've missed, and what so many people do, even my smartest, like, wealthy clients do this all the frickin' time, and at that point, it's just like kid gloving it, right? Like, and what they do all the time is, they don't have their attorney go in and add the important terms to that deal. And at big businesses, that's what top attorneys are paid to do, is you literally write the term sheet, you make sure that none of the important, we call them standard market terms,

• 8:14Speaker 02

  are missing, because if they are, when you go to wrap up the deal later, like, put all of the, let's say, the contracts around the term sheet, when you go to do that, the first thing I'm going to say to you is, oh, you didn't put that in the term sheet, that's not part of the deal, you're not getting it. And then I'm going to push you around to get all the things I want. That's just how it works.

• 8:37Speaker 01

  On the flip side of the coin, when it comes to selling, what are some of the biggest mistakes business owners make when they're finally selling a business they spent 20, 30 years of their life building?

• 8:46Speaker 02

  Yeah, yeah. The number one biggest one is vetting the buyer. Like, you see this happen all the time. Again, say you're selling your business for $25 million, and it's like, really big deal to your entire legacy, but you like the buyer, and you're dealing with them, and you haven't really done a private investigation on them, you haven't really vetted their proof of funds, you haven't even vetted if they're able to close, and then you're doing a deal with them for nine months, and the deal never closes. And guess who you have to thank? Your frickin' self.

• 9:19Speaker 01

  Absolutely. How do you make sure the person promising to pay you three years from now will actually be able to pay?

• 9:28Speaker 02

  Yeah, yeah. I mean, that goes back to, literally, if you're not asking for the other guy's personal finances, his PFS, or his balance sheet for his businesses, or whatever, if you're not asking for these very basic things in business, then you're all, like, literally, you already don't have a clue. And I have one really genius, like, again, a lot of my clients are really smart, and when you hit that phase where you're suddenly dealing with big transactions, they just don't know. What they don't know, I have this one client who was just dealing with this very issue and selling his business, it was like, two months ago, and I said, ask for the guy's, the buyer's financials, and he felt shy about it. He felt like, ah, that's, that's personal information, why would I ask for that? And that's the wrong mindset to have about that type of stuff.

• 10:12Speaker 01

  Absolutely. On the lawsuit side, can you be completely right and still have a terrible lawsuit?

• 10:19Speaker 02

  Yeah, you can. I mean, again, like if you have your buddy who's your family attorney, file your paperwork, have fun with that. A lot of people do this. I have to explain to people, no, you need somebody who actually knows this area of law. You need somebody who's gonna do their best. This is why top-tier attorneys cost $2,500 an hour nowadays, these partners. It sounds crazy. People don't believe it. That's just because they don't understand. These attorneys are spending a lot of time on these, they know everything about these cases. They know all the winning points. They know all the ninja tricks. And when you hire a mediocre attorney, it's kind of like getting a horse into a horse race that's never been trained. And you just watch him get

• 11:02Speaker 02

  last place as the other guy's top attorney is the first to cross the finish line.

• 11:08Speaker 01

  How much of litigation is actually psychology and leverage rather than arguing before a judge?

• 11:13Speaker 02

  I would, yeah, arguing before a judge is super important. And what the judge thinks and says, and does, the most important thing. But man, oh, man, it's all about leverage and psychology. It's all like, if you know the other side can't afford to litigate, or if you can try and get that information upfront through legal means, then that's leverage. You know, they can't even fight you and they're just putting up a front. Everybody in lawsuits puts up a front. They make threats that they can't stand behind. And their goal is to pressure you into settling through using little leverage tax, whatever they can, whatever the opposing side can find to lever against you, any weakness they can find, they're gonna do it. That's literally the job.

• 11:55Speaker 01

  You trained inside some of the world's biggest law firms. What's something sophisticated corporations know about protecting themselves that small business owners usually learn only after they got burned?

• 12:05Speaker 02

  Oh, my gosh, there's so many things. And that's what we do really at our firm is we give small and mid-sized business owners this top-tier level of protection that they'll never see in their lives at like, really low, honestly, my prices should be way higher, just is what it is. I like my client base at really low prices. And there's a million things. For example, like what people, what people often do is they think that lawyers are just providing form documents. Here's the form. Have the, have our customers sign this document. For example, I have a lot of construction company clients between five and $20 million like size, like gross revenue in terms

• 12:45Speaker 02

  of size. And a lot of them have never reviewed their customer, their general contractor agreements, basically their, their contracts for doing the construction work. And there's so much stuff in there in a standard contract, which basically makes it so that you have no lie or very little liability. It's very normal in that space. And nobody has contracts that say that. Also, like, we have a case where like a GM at one of these, these businesses stealing all the customers and clients right now are in a huge lawsuit. And they never even pay, yeah, I gotta be careful what I say. Certain things were papered and certain things were not papered. And a lot of things really need to be papered that you don't even know that you're supposed to be having an attorney

• 13:29Speaker 02

  to review. And in last point here, what's always going on in these small, mid-sized business owners mind is, oh, you know, the attorney costs 1,500 an hour and we don't cost that much. But they cost that much. I don't need that. That's ridiculous. I can have AI do it. And again, like, I'm not, I'm not a rude person, but you're an absolute idiot if you're one of those people. And you're gonna, you're just gonna get burned every time.

• 13:53Speaker 01

  You have helped so many businesses over the decades. What's your biggest challenge now?

• 13:58Speaker 02

  Oh, yeah. So, yeah, right. Okay. So now that I'm not just an attorney, or just like I did tech startups before, just in tech, which is super fun. Now I'm like, running a big law firm, I say big, relatively big law firm, and we're growing really rapidly. It's just that a whole new phase in life really is being more of an add, you know, being able to manage the fleet as opposed to just being the point of the spear. So that's my biggest challenge now is just now, just dealing with scaling and growth and all the things that come up when that happens in a business. New things come at you and you have to be ready to, to adapt and welcome those and understand that you're in a new phase. So that's kind of what's going on with me right now. Last.

• 14:42Speaker 01

  Your passion is obvious. What do you like best about what you're doing?

• 14:46Speaker 02

  Yeah, yeah. I mean, the number one thing I've always liked is protecting clients, like actually wanting to be there for them and try your hardest for them. And make sure that, you know, it's not just at big firms, it's just another name on the, it's just another piece of paper. Like you have no, not everybody, but 99% of the cases, the attorneys have no emotional connection to your case, actually. Like a big law attorney is just so disconnected. And guess what? It is what it is. Like, that's how you're trained to be. But I always want to get in the ring and fight for my client. It's just kind of in my nature. And, and so that's really fun for me. It's kind of like nice to have some care and it not just be paperwork. Because that could be, you know, that it's, it's really

• 15:29Speaker 02

  just kind of dry and, and really stale at that point. So yeah, I mean, there's that basically be standing up for the client. Yeah.

• 15:37Speaker 01

  Well, we know your time is incredibly valuable. We greatly appreciate you spending some of with us. For our folks watching or listening who want to learn more, where is the best place for us to send them?

• 15:45Speaker 02

  Yeah, absolutely. Hey, you can come talk to me. Check out my website, prencipe.com. You can get the spelling of that name here in the podcast description or wherever it's at. And you can book a call with me through my staff. And I'm happy to talk about, give you a free consult and tell you, you know, talk to you about what's going on with your situation and tell you the best route that you should take from there.

• 16:08Speaker 01

  Awesome. This has been Seth Green with Joe Prencipe. Joe, thanks again for joining us.

• 16:12Speaker 02

  Thanks for having me, Seth. And if you're watching this, please like and subscribe.

• 16:16Speaker 01

  Thank you very much. Thank you, everybody for watching or listening. We'll talk to you or see you next time.

• 16:21Speaker 03

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