Starting your own small business can be an exciting if not intimidating endeavor. The failure rate for small businesses is generally 50 to 70% within the first 18 months. The thrill of big risk vs. big rewards attracts many entrepreneurs. However, from 2008 to 2010, more than 200,000 small businesses shut their doors according to the U.S. Census.
Of the many pitfalls that small business owners might face, a lack of understanding of the basic ins and outs of running a business rank high on the list. Many small business owners might not think to hire a business attorney. In a budget conscious start-up world, attorneys can be seen as an extravagant expense. Legal counsel might not be an obvious component of your budding business, but many corporations have started to retain in-house legal counsel. Established small business owners also need legal counsel. This is not a service you should skimp on. Exorbitant legal fees from litigation or payment from violations (environmental, zoning) can close your business doors. So let’s get down to the brass tacks of the whys and whens of hiring a business lawyer.
Why Hire a Lawyer?
Usually people turn to attorneys when faced with a lawsuit or legal question. Running a small business is different. You want to make sure that your company is compliant with the local and federal regulations and laws and legally protected for the future. Many companies and business owners just starting out don’t want to spend the money to retain an attorney. Start thinking of retaining an attorney as legal insurance. The legal fees you will pay now could save you thousands of dollars in future litigation. Pay now, save later.
Attorneys perform a variety of functions outside of the courtroom. From helping you determine the legal structure of your business (corporation or LLC?), drafting contracts, and registering for federal trademark and copyright protection, attorneys are a one-stop-shop for creating a stronger organization for your small business.
When to Hire?
Here are a few crucial moments to seek the services of an attorney:
1) Planning Stage
Hire an attorney if you need assistance determining the best legal structure of your business. Attorneys can advise you on the advantages and disadvantages of registering your business as a corporation, limited liability corporation (LLC), or business partnership. Although you do not need an attorney to create an LLC or partnership, forming a corporation will need the services of an attorney.
2) Buying or Selling
Hire an attorney when negotiating large sales agreements, lease agreements for real estate, or drafting contracts. Legal documents can often contain many pages of “legalese” that can confuse even the most well-read individual. Your lawyer will go through the document carefully and make sure there are no surprises before you sign any major agreement.
This is the most common time when people seek the services of an attorney – lawsuits. Lawsuits can range from violations of federal or state law, employment, environmental, or governmental issues. Lawyers and law firms specialize in many different practice areas. Be sure to find an attorney that specializes in your particular legal issue.
If your small business is centered on innovation, then you might want to seek legal advice from an attorney who specializes in intellectual property. First consult an attorney if you want to register your products and services for a patent. Your attorney can advise you through the lengthy process of patent registration and if it is the right choice for your business.
Whether or not you think you need one, hiring a business lawyer and one step to creating a stronger future for your small business.
- Failure Rate: www.businessinsider.com/small-business-owners-are-optimistic-2013-6
- Census: www.breitbart.com/Big-Government/2012/07/26/Census-shows-200000-small-businesses-shut-down
Connie Davis is a contributing author for NerdWallet, a personal finance website, where you can find advice on a range of topics from managing credit debt to where to find coupon websites.