An attorney well versed in business law can be a valuable asset to your small business. He or she will be able to help make sure your business is set up properly and avoid any legal risks. Starting a business involves tackling a lot of issues that aren’t necessarily related to the service or product you offer but are necessary to make sure you set a strong foundation for your company.
So, how can a lawyer help you start your business? As you’re going through your business planning to get set up and running, there are going to be certain legal issues that need to be addressed and some common pitfalls that can be avoided. Handling all of this up front can help avoid issues down the road, and someone who provides legal advice for small business owners can help you navigate all of that. Lots of business owners have the question, “So, what are the benefits of hiring a lawyer for my business?” Here are some things to consider.
Navigating The Legal Structure
One of the many steps you’ll need to take care of as you start putting your business together is figuring out which business entity is the best setup for your business. The most common ones are sole proprietorship, partnership, limited liability company (LLC) and corporation.
Many business owners overlook the importance of this step, but tread carefully. This will have implications on your potential liability and your tax obligations. For example in a sole proprietorship and a partnership the owners are going to remain personally liable for the debts and obligations of the business; that’s not something very appealing to most business owners. If you’re going to be in that situation you should at least understand the implications of doing so.
LLC’s and corporations are more structured and formal business entities, but they come with filing requirements and some corporate formalities to keep them in good standing, and limit your liability. There’s more to it than just filing some paperwork with the state.
There’s also the consideration of how many owners there will be. All the legal structures aren’t available to every business, for example you can’t be a sole proprietor with more than one owner. Multiple owners will mean that you need to consider everyone's rights, responsibilities and obligations, and take into account situations where someone wants out, passes away or becomes incapacitated. These issues are better addressed up front when you’re getting started and everyone tends to be on the same page, otherwise you’ll end up in a dispute that will drain time and resources from the business. Having a lawyer advise you on how to handle these considerations and set up your entity from the start will buy you some peace of mind and save you hassles down the road.
Ensure Business Compliance
All businesses have to comply with various local, state and federal rules or laws. The implications of this vary greatly depending what industry you’re operating in and what locality your business is in. For example, many counties and cities require that businesses get a business license. Several industries are regulated by the state, for example in Virginia there is the Department of Professional and Occupational Regulation, which requires certain industries to register for a license and even dictates language that must be included in contracts for some licenses.
Staying compliant isn’t always as straightforward as it may seem; laws and regulations change regularly and often those changes aren’t on the radar of business owners. Zoning regulations could change, tax filing rules may be adjusted, minimum wage requirements are modified, data privacy laws require updates to information, and many other potential regulatory changes that the business will need to address.
Many businesses get themselves in trouble because the compliance end isn’t something that they deal with or see everyday and has nothing to do with how they are delivering their product or service. Then, they end up facing fines, penalties and lawsuits for an issue that could have been completely avoided.
Set Up Your Contracts
A good rule of thumb for business owners is to have a contract in place for all your relationships, both external and internal. That means vendors, clients, customers and service providers among others on the external side. Internally, it means employees, independent contractors, interns and anyone else who has a hand in your operations. Contract disputesare one of the most common issues that business owners face, and it’s often because they don’t have any contracts in place, a situation that could be completely avoided.
Starting out, most businesses address contracts one of two ways - they just don’t have them at all, or they look online for a general template to use (which may be worse than not having a contract at all).
Not having contracts in place puts you in a situation where there’s no real consensus on what each side agreed to, what your rights are and what your potential liability is if something goes wrong. The last thing you want to happen is to end up in a he said, she said situation over a contract; it will cost you time and money and could have been avoided all together.
On the other hand, there probably is no general online template that can account for all the intricacies of your business or address all the variables involved in how you operate. Be careful trusting a generic, online form builder to create a contract that’s going to be crafted carefully to protect what you do.
A lawyer can help you set up some of your stand services agreements and internal agreements early on.
Avoid Issues Early
One thing you want to do is avoid issues whenever possible and limit your potential risk or exposure to disputes and lawsuits. Running a business is inherently risky, and you will likely invest significant time and money into getting it up and running and to make it successful. You’ll want every advantage possible to stay out of lawsuits.
A lawyer can help you develop some startup best practices and business processes that will help keep you from facing some issues as you start and grow your business. Taking a proactive approach to address some of the common risk problems small businesses face can prevent a lot of headaches down the road.
Protect Intellectual Property
Every business has some intellectual property whether it be trademarks, copyrights, trade secrets or patents. You’ll want to be able to recognize what types of intellectual property you have, how to register it if you need to and how to protect it. You’re going to be growing a brand and setting up business systems to grow your business, these steps will create some valuable property that needs to be protected. Don’t overlook your intellectual property, it can be an extremely valuable asset to your company.
Hiring a business lawyer can be advantageous to your company as you get started, both in terms of having someone to handle part of the setup, such as the entity formation, and more importantly as a strategic advisor who can get you set up to avoid common issues and have a clearer path towards sustainability.
Have questions about starting a business or making sure your existing business is protecting itself where it can? Contact us for a free consultation.