Business Lawyers: Do You Need One?
Learn when you need to hire an attorney for your business.
For most businesspeople, deciding whether to call an attorney should be like deciding whether to go to the doctor. If you have severe chest pain, odds are you're not going to hesitate to call your physician or hightail it to the emergency room. But if you just have a bad cold, you might wait a few days to see if it turns into pneumonia before you drag yourself to the dreaded doctor's office.
Likewise, you should call a lawyer when you have a serious legal problem -- for instance, you're being investigated for securities fraud by the SEC or a customer is severely injured by one of your products.
But in other instances it might not be so clear. For instance, do you need a lawyer when you're starting a business? Dissolving one? Buying or selling a business? Hiring high-level employees? Since legalities seem to pervade even the most basic business decisions -- and lawyers have helped this perception along -- you might be afraid to tackle a "legal" issue without a lawyer. Or, on the flip side, you might have had a bad experience with a lawyer that was enough to put you off them forever, no matter what the cost.
If you're the "always need a lawyer" type, there is actually a lot you can start to do for yourself. But if you're the "no lawyers for me, thanks" type, it's important to recognize when you're in over your head and need the help of a competent lawyer.
When You Probably Need an Attorney
There are a few situations when you'll want or need the advice of a good small-business attorney. Here are just a few examples of serious legal issues that require the help of an experienced lawyer:
- You and your business partners want to make so-called "special allocations" of profits and losses in your partnership agreement or LLC operating agreement (this is a tricky area that needs the help of an experienced tax attorney).
- You or your business partners want to contribute appreciated property to a partnership or LLC (this also requires the assistance of an experienced tax attorney).
- You're buying a business and a major environmental issue comes up (environmental protection laws carry heavy penalties for landowners, even for those who didn't cause the contamination).
- An employee or former employee threatens to sue your business for discrimination or one of your managers for sexual harassment.
A mistake in any of these areas can cost you -- and your business partners -- serious money. In any of these situations, paying for the help of an experienced lawyer will more than offset the potential harm you might cause your business if you don't deal with these issues properly. The tricky part is finding a lawyer who is experienced in these specialty areas, as well as being someone you can work with. (For more help in finding a lawyer, see Nolo's article How to Find an Excellent Lawyer.
When You Probably Don't Need a Business Lawyer
If you're just starting out in business, you can take care of most tasks yourself. The following is just a small sample of tasks lawyers charge lots of money for that you can easily accomplish yourself with a good self-help resource:
- research and reserve a trademark or trade name for your business
- file a fictitious business name statement if you will do business under a different name
- research and reserve a name for your corporation or LLC
- apply for and reserve a domain name, if you will do business on the Web
- create your own partnership agreement, LLC operating agreement or shareholder's agreement
- form your own partnership, LLC or corporation
- apply for your business employer identification number (EIN)
- apply for the required business licenses and permits
- lease commercial space, and
- interview and hire employees, and complete the necessary IRS paperwork.
There are some great self-help resources that can get you started on all of these tasks that can save you hundreds, if not thousands, of dollars in legal fees. You can find a book or software product that will walk you through each of these transactions here on the Nolo website at www.nolo.com.
Once your business is up and running, there are even more legal tasks you can take care of yourself. For instance, you can:
- hire independent contractors and consultants, and prepare written agreements for them
- create written contracts with customers and clients for the sale or rental of goods
- document LLC meetings and actions
- call and hold corporate meetings and prepare corporate minutes
- create a buy-sell agreement with your business partners
- update your partnership agreement, operating agreement or shareholder's agreement as your business circumstances change, and
- handle an IRS audit.
With the right self-help resource, you can accomplish all kinds of legal tasks at a fraction of the cost of hiring a lawyer.
When You and Your Lawyer Can Work as a Team
One of the nice things about taking care of your own legal tasks is that if you educate yourself about basic legal issues, you can take care of a lot of the legal legwork yourself and just involve your attorney when you have a specific question.
Lots of businesspeople like to create their own business contracts and then ask their lawyer to look them over to make sure there aren't any gaping holes or major legal issues. This "legal coach" arrangement can be one of the most cost-effective ways to use legal services.
No matter how you decide to approach business legal issues, make sure you find an attorney with whom you have a good rapport, who is responsive and willing to let you handle some of your own legal issues.
For More Information
To learn more about when you need to hire an attorney for your business, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).