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Lawyer Up!
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When (And Why) You Need A Business Attorney
By Don Sadler
In the age of big-box home improvement stores, many people have started handling fix-it projects themselves. The worst that can usually happen is a plumbing repair springs a leak.
Do-it-yourself lawyering, however, is another story.
Some small-business owners learn this the hard way. They decide to handle a relatively simple legal matter themselves to save money on legal fees. It turns out to be an expensive and even dangerous mistake when the legal matter isn’t so simple after all.
“While it’s fairly easy to look up answers to basic legal questions online, a non-lawyer may miss something crucial, like statutes of limitation, a recent case or statute that changed the law, or important jurisdictional questions,” says Paul Sharman, the owner of The Sharman Law Firm LLC in Alpharetta, Ga.
At the same time, though, you shouldn’t spend valuable resources on a lawyer if the expense won’t result in practical benefits for your business.
“You should use an attorney when you need one, but only when you need one,” says Jonathan Mangels, a partner with the accounting firm of Greer & Walker LLP in Charlotte, N.C.
Mangels has worked in partnership with many small-business owners and their attorneys. He points to the following situations where an attorney may be able to serve a valuable role assisting a small business.
Contracts And Leases
Small-business owners enter into legally binding contracts with many different types of suppliers, vendors and customers, as well as their landlords. Drafting and review of these contracts is one of the most common areas where small-business owners seek the assistance of an attorney.
And rightly so, says Mangels.
“You usually don’t want to go it alone in these areas.”
Today, websites abound where you can save money by buying contract and lease templates.
“But if it’s more than just a plain vanilla contract or lease, you might want to have an attorney review the contract or lease to look for potential landmines,” says Mangels.
Business Startup
Entrepreneurs must make crucial legal decisions during the early days of launching a business. One of the first is deciding which ownership structure will be the most beneficial. And the options can be confusing: sole proprietorship, partnership, limited liability company or corporation.
While an attorney can help you choose the right form of ownership and can draft the necessary paperwork (like articles of incorporation, for example), Mangels says this may be a task that savvy owners can tackle themselves.
“Some websites make it easy for owners to draft these documents themselves. In fact, this decision is as much tax-driven as legal-driven, so you might want to consult both your CPA and your attorney,” says Mangels.
Another startup contract you might face: the buy-sell agreement.
“Any business with two or more partners or joint ownership should have a buy-sell agreement in place that specifies how partners can buy each others’ shares and how potential disputes are handled,” says Sharman.
Better to consult with an attorney to get the buy-sell agreement right than to risk problems on down the road.
Employment Issues
Employees and personnel may be the area of greatest legal liability for many small businesses today. Attorneys can help in this area by working with owners to draft or review:
- Employment contracts
- Non-compete and confidentiality agreements
- Employee benefit plans
- Employee handbooks
“Any business, regardless of size, that possesses trade secrets or proprietary information should make sure it has drafted a strong confidentiality agreement for employees to sign,” says Sharman.
Meanwhile, if your business is faced with employment-related legal issues, such as a wage and hour lawsuit or discrimination claim, Sharman recommends that you hire an attorney who specializes in employment law to represent you.
“An experienced employment law attorney will be able to understand the claims, investigate the validity of such claims and determine how best to proceed in defending you and your business,” Sharman says.
Collecting Customer Payments
In the ongoing sluggish economy, many small-business owners are facing greater challenges in collecting accounts receivable.
If a receivable has stretched beyond 90 days, and you’ve received no response to your own payment inquiries, Sharman says it might be time to consider hiring professional help in the form of a collection agency and attorney.
“When you have collections issues, contact a collection agency, which will attempt to collect the debt for you in exchange for a percentage of the amount owed,” Sharman explains. “If the agency is unsuccessful, and you decide to file suit against the debtor, this is where the attorney would come in.”
Estate And Succession Planning
Estate and succession planning may go hand in hand, but they differ in their goals.
Estate planning determines how you will distribute assets (including your business) to your heirs while minimizing estate taxes. Succession planning determines who will own and manage the business after you leave.
Both types of planning are critical, but often neglected, by small-business owners. And both types of planning can benefit from the assistance of an attorney.
First, a lawyer can demonstrate how estate planning tools like wills and trusts help ensure that your wishes are fulfilled and taxes are minimized when your assets are distributed to your heirs. An attorney can then draft and review these estate planning documents for you.
An attorney can also consult with you in planning for the future ownership and leadership of your business. Drafting important succession documents like a buy-sell agreement are best handled by a lawyer who specializes in that field.
Business Mergers Or Acquisitions
Mergers and acquisitions are usually complex transactions that require the professional guidance and assistance of a team of outside experts, including an attorney.
“In particular, small-business owners should work closely with their accountant and an attorney when selling their business or buying another business,” says Mangels.
M&A attorneys tend to specialize in this area, he adds, “so be sure to seek out an attorney with M&A experience—ideally, in your particular industry or type of business.”
Don Sadler is a freelance writer who covers topics related to small businesses and self-employed individuals.
Learn More
The NASE doesn’t offer legal advice. But, the association does provide members with exclusive online content that will help you understand your legal responsibilities. Here are just a few of the free articles that are online now.
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- Review of independent legal documents
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