Every business needs an accountant and a lawyer; an accountant helps oversee your financial processes and ensures taxes are prepared correctly. A lawyer can help set up your corporate structure, protect your intellectual property, deal with real estate, insurance, and tax issues, defend you in the event of lawsuits or other liability, and even provide exit strategy and estate planning advice.
Many businesses often turn to a lawyer only when it's too late. The best time to find a lawyer is before you need a lawyer; not only will the attorney be familiar with your business, but he or she may be able to help you avoid problems before they occur. If you run a small business and don't feel consulting with a lawyer is necessary, keep in mind the fees you are charged for services that help you avoid legal problems will be far lower than the fees you are charged when you are faced with a legal problem.
When should you consider seeking legal advice? Here are just a few situations where getting the help of an attorney can make sense:
- Establishing a legal business entity. Online or do-it-yourself incorporation tools can help you save money, but the process is sometimes more complicated than it may at first appear. An attorney can not only help you file the appropriate documents, but he or she can also help you determine which type of corporate structure is best for your needs and type of business.
- Hiring employees. Employee lawsuits and disputes most commonly occur because an employer did not properly define the employment relationship. Problems are not limited to issues like pay policies, overtime policies, and benefits programs. Many businesses fail to protect intellectual property and customer relationships. Solid non-disclosure agreements and confidentiality agreements can protect you from losing control over intellectual property and from watching your ex-employees become your direct competitors.
- Firing employees. Hopefully you will never be forced to fire an employee, but if you are, ensuring that you do so in a legal and defensible manner can help you avoid litigation.
- Creating and signing contracts. Agreements, leases, and other contracts are binding once signed; the contracts you sign should not commit you to one-sided terms that place you at a disadvantage. And the contracts you create should protect your company and serve in its best interests.
- Protecting products and services. If you create or develop new products and services, getting the right copyrights, trademarks, and patents will protect those assets and ensure they remain a competitive advantage.
- Resolving disputes. An attorney can help resolve external disputes, like with vendors, suppliers, or customers. An attorney can also help resolve internal disputes between partners, shareholders, and even employees.
- Purchasing other companies. Buying another business can create a number of business, legal, and tax considerations. An attorney can structure the agreement properly, negotiate terms, and help look for potential risks and liabilities created by the purchase. And, depending on the nature of the industry and the business, an attorney can help you understand and meet regulatory guidelines.
- Bringing in partners or shareholders. When a company issues stock, notes, and other corporate securities, the process is governed by state and federal laws. Violating those laws could create liability for company owners and executives. Partnership agreements should specifically detail the rights and responsibilities of all parties to avoid misunderstandings.
- Succession planning. Small companies rely heavily on every employee, especially the founders and key executives. A succession plan can not only help the company survive the loss of a key employee, but also deal with the potential financial ramifications. A good succession plan identifies contingencies and establishes a plan for dealing with those situations. "What happens if someone leaves the company?" is a question that should be answered ahead of time.
- Selling the business. Selling a sole proprietorship can be relatively simple; selling a corporation can create a number of tax and legal obstacles that must be overcome. In addition, the manner in which you sell the company (transferring stock, deferring payments, etc.) can dramatically affect your tax burden. A good attorney can guide you through the process of selling a business and ensuring the sale is on terms that are as favorable as possible.
You will definitely need an attorney if:
- You face a serious legal problem. Examples include a customer who is injured by one of your products, a vendor who violates a contract, or if your business fails to comply with state regulatory requirements.
- Employees sue or threaten to sue. If an employee sues for discrimination, wrongful termination, sexual harassment, or another issue, immediately seek the help of an attorney. Not only is your company liable, but in some cases you or your employees can be held personally liable as well.
- You face an environmental issue. Violations of environmental protection laws carry heavy penalties; plus you may be liable for cleaning up any hazards or violations.
- You are concerned about an issue... but are not sure. The worst time to look for a lawyer is when it's too late; if you're unsure about an issue, about potential liability, or about whether you are in compliance with regulations or laws, ask an attorney for guidance. Legal advice is often like insurance: you pay a little up front in order to avoid major expenses later.