Why Business Lawyers Are a Necessary Expense
Business attorneys may be expensive, but a good one is worth every dollar paid.
Lawyers can be expensive. I myself am a victim's attorney, so my contingent fees come at the end of my cases, out of money that I recover for my clients, not up-front. But I also happen to be a business owner, so I know that in order to be successful, you must be willing to spend money on a good business attorney. Despite the significant initial expense, not having the right lawyer to advise you about your new business can end up being far more expensive in the long run.
So how do you find that attorney, what should you expect, and how do you get the most bang for your buck?
When do you need an attorney?
The moment you decide to start a business is the moment when you need an attorney. You should have a lawyer for your business before you face a lawsuit or an audit. Once you're in a courtroom, the costs of a litigation specialist will dwarf what you may have spent on an attorney to set your company up properly.
A small-business lawyer who works with startups can help you determine the type of business entity you want to form — corporation, partnership, limited liability company — and can prepare the paperwork for filing. A good startup lawyer will help set you up correctly so you avoid legal problems down the road. This is money well spent.
As your business grows, you may find that you need other attorneys for different matters, such as tax advice, intellectual property, contracts and real estate. The steps you used to find your startup lawyer will be equally valuable when you hire these specialists. Your small-business or startup lawyer can probably refer you to other types of lawyers you may need.
How should you use your attorney?
Your lawyer is trained to do many important things, but he or she is not a mind reader. You may be paying for guidance and advice, but ultimately, the business is yours, and the money you're spending is yours. And you will be spending money, so spend it wisely.
Before you get on a call or sit in an office with your attorney, put together a list of questions. Define your objective. Do you want general advice, or do you have a specific issue that requires resolution? When you know your end goal, the questions should come easily.
Explain your issue or concern to the attorney as concisely as possible. Then ask him or her bluntly: What are my rights? What can or should I do about this? And — most importantly — how can you help me get what I need or want? If the answer you get doesn't sit right with you, push back or ask more questions. You're entitled to the best advice and representation possible.
What should you expect from your attorney?
In addition to helping you determine the type of entity for your business, your startup attorney should be handling a range of tasks that are critical for a new business. Even though it is his or her job to know these things, the better educated you are, the more you can stay on top of things.
Find out if your attorney will be doing a business-name check to ensure you have the right to use your chosen name and whether it is appropriate to file a fictitious business-name statement. Your lawyer should also help you secure a federal tax ID (an EIN) and draft a partnership agreement, articles of incorporation or another business-formation document needed to establish your company.
All of these steps are important for new businesses. Having them done by a professional will ease your mind and free you up so you can focus on the business itself.
How do you find the right attorney?
Education, experience and credentials are all very important, but don't get carried away by lawyers claiming to be in the "Top 10" or "Top 20." As an attorney, it pains me to admit that many of these awards have been purchased and have no validity. Do your homework and verify the attorney's qualifications through several sources. A web search is always a good way to start looking for information, but I also recommend talking with other business owners and getting referrals.
When starting your business, you'll want an attorney who knows his or her way around small businesses. As your business evolves, you'll also want to verify the expertise and experience of legal specialists you hire. The bottom line is that you should only work with someone you can rely on to give you good advice and handle things professionally.
Interview attorney candidates just as you would job candidates. Ask direct questions: What is your area of expertise? How much experience do you have? How will I be charged? Make sure they have no conflicts of interest (you don't want them representing your competitors) and that you'll have clear lines of communication. It's better to find these things out before you sign the dotted line and discover your attorney AWOL during an emergency.
Ultimately, the most important question you need to ask yourself before engaging a legal professional is, "Do I feel comfortable with this person?" You may be working with this person for many years. Will you dread or look forward to calling him or her for counsel? Just as with dating, attorney-shopping involves chemistry. The best attorney on paper may not be the best one for you as you navigate the highs and lows of building a business.
Starting a business can be challenging. With so many moving parts and so much out of your control, it's critical to have a solid foundation under you. A good business attorney can provide you with that foundation as well as the blueprint for erecting sturdy walls for the structure you're building. When you work with someone you like, the experience can be rewarding on many levels.
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