Why a Small-Business Owner Should Hire an Attorney
It is not uncommon for business owners to look for legal assistance only in times of distress. For small-business owners, however, this could be a costly mistake in some situations, or an end to their business in others.
Regardless of whether you’re a startup or an established small business, hiring a business attorney in times of distress is generally more expensive than retaining one sooner to prevent legal problems from developing.
The golden rule for a small-business owner should be to have a business attorney as a trusted adviser, one with whom you’re comfortable discussing simple and complex matters. In other words, it is prudent to be proactive rather than reactive when confronting legal issues.
Clearly integrating a business attorney in the planning process not only helps a small-business owner anticipate problems or hurdles, but it can also give the business owner control over responsibilities such as navigating complex government laws and regulations, addressing employee issues, interacting with third parties and the public, and establishing rights and expectations of the founders upfront.
For example, hiring a lawyer to negotiate and draft an agreement between business partners can prevent disputes as the business grows, which can avoid litigation that costs thousands of dollars to resolve down the road.
Likewise, a lawyer can advise on the types of business entities available to help entrepreneurs take advantage of federal and state benefits and enhance the probability of using the right legal structure to grow and develop the business.
Business attorneys can also assist entrepreneurs in understanding the types of funding sources available and advise them on development of a strategy to put the business on track to acquire the funding.
Legal counsel can guide small-business owners when determining how to raise capital they need to manage and run the business. This relationship can assist the business owner in understanding the risk associated with raising capital.
If this process is not followed, as the business grows, the legal fees to change the business structure and update records to meet its growth and development plans will be substantially higher.
Seeking legal advice from the beginning aids entrepreneurs or small-business owners in making better business decisions, especially in regard to taking measured risks, funding, strategic partnerships, intellectual property issues, security, and logistics.
For example, a good business lawyer can enlighten entrepreneurs about the risks and benefits of engaging in certain activities and navigate them through legal and administrative processes. Oftentimes there are tricky administrative issues that need to be addressed. Using an experienced business attorney may expedite this process.
Furthermore, business lawyers usually meet with many other businesses and have a large network of referrals, which may be useful in forming strategic partnerships. The right strategic partners may open up opportunities to take the business to the next level.
Understanding compliance and how to interpret rule changes is a substantial part of the attorney’s responsibilities. It can be difficult for a small-business owner to stay on top of ever-changing compliance issues, and an attorney can substantially reduce those compliance risks, which lead to costly investigations and/or penalties.
Moreover, handling an exit strategy can be complex and sensitive for the business owner. In fact, exit planning or succession planning is important for any small business, but especially critical for a business that has more than one owner.
Your succession plan should cover what happens to your co-owners’ interests if they pass away or simply want out of the business.
Succession plans are also especially important for family-owned businesses, where the owners want to keep the business in the family. You need a small-business attorney to make sure an appropriate buy-sell agreement is in place.
And even if you decide to take the do-it-yourself route, you should ask a small-business attorney to “check your work.” For example, if you wrote your business contracts yourself, an attorney can make sure the contracts include all of the necessary clauses and legalese and will be enforceable.
If you form your own business entity, your attorney can review your operating agreement, partnership agreement, or bylaws and suggest areas for improvement.
This type of coaching arrangement can save your business money while building a great working relationship with your attorney.
As your business grows and your legal questions become more complex, you’ll already have an attorney you’re comfortable with and who knows your business.
And if you decide to buy or sell a business, you need a small-business attorney to negotiate and draft sales agreements, negotiate and draft asset purchase agreements, and conduct the necessary due diligence. They are invaluable in getting you through the transaction without adversely affecting your business.
Last, but certainly not least, you need to hire a small-business attorney because your time is valuable. An entrepreneur’s to-do list is always a mile long.
If you can delegate some tasks to someone with more expertise than you, you’ll save yourself time, money, and quite a number of headaches in the long run.
There is certainly something to be said for spending your time on the aspects of your business that you love and entrusting the rest to experts skilled at handling the business’s other facets.
If you decide to hire a lawyer, retain one who understands your industry. Today, each industry has tendencies and characteristics that affect the decision making of a business.
Someone with experience in technology may not be the best choice if you plan to open a retail store, for example. A lawyer who has experience with businesses like yours will be able to advise you on available options, as well as on your industry’s general best practices.
Ultimately, you want to develop a long-term relationship with your attorney, and the best place to start the relationship is, of course, at the beginning. BW