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 then you are faced with a legal problem. When should you consider seeking legal advice? There 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 saves money, but the process is sometimes more complicated than it may 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. Also, choice of entity discussion could be the most important decision you make around formation.
While most corporations will use an attorney to help with the process of incorporation, new businesses sometimes neglect the on-going legal requirements to maintain their corporation status. Annual shareholder, director and partner meetings need to be held, and recording of minutes and election of officers must conform with state requirements. Failure to do so could jeopardize corporate status and result in “piercing of the corporate veil” in the event of a lawsuit or other legal action, exposing corporate officers to personal liability or other legal problems.
Premises liability, professional liability, error & omissions; all worthy of a conversation with an attorney to ensure your enterprise is protected in the event of an accident or mistake.
Many intangible assets of a business should be le ally protected. A company’s name, logo, brand name may be entitled to trademark protection. Proprietary computer software, semiconductor chip mask designs, vessel hull design and many other creations may be eligible for patent registration. Patents are often thought to cover only machines and other manufactured products, but can also protect processes, such as a method for refining petroleum, or new compositions of matter, such as chemical compounds or mixtures. Trademark, copyright and patent registrations can help a business protect the things that give it a competitive advantage in the marketplace
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.
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 contract are binding once signed; the contracts you sign should not commit you to one-sided terms hat place you at a disadvantage. And the contracts you create should protect your company and serve in its best interests.
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 and removing 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.
Small companies rely heavily on every employee, especially the founders and key executives. A succession plan can not only help the company surviye 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 or other regulatory issue. Violations of environmental protection laws carry heavy penalties; plus you may be liable for cleaning up any hazards or violations. Certain areas are heavily regulated; e.g., healthcare, FDA, if you are in the healthcare device space.
- 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.
About Manfred Sternberg
Attorney and author Manfred Sternberg has a long history as a successful business entrepreneur. He has been practicing law in Houston, Texas for over 30 years maintaining an active civil law practice focusing on providing general counsel, including capital formation, crowdfunding, mergers and acquisitions, litigation strategy and contract enforcement. Manfred has been Board Certified in Consumer and Commercial Law by the Texas Board of Legal Specialization since 1993.
He is the author of the entrepreneur training course, How to Crowdfund which has chapters that have been widely used over the last decade to train real estate investors around the country. The course manual was recently updated to include, what many consider to be the most exciting fundraising opportunity in 100 years, Real Estate based Crowdfunding.
Business owners and entrepreneurs seek Manfred’s advice and insight regarding proper entity formation, creating clear and concise contractual relationships among owners, employees, and third party vendors and customers. Manfred acts as the “go to” legal adviser for numerous established businesses in their day-to-day business operations.
Manfred’s track record of working with clients from the earliest stages of their development through significant liquidity events, typically in the role of outside general counsel managing the legal issues related to each growth stage, allows him to bring a uniquely broad-based perspective to the matters he handles.