When Should You Hire A Lawyer For Your Small Business? [Guest Blog]

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Smart patients don’t wait until they’re sick to look for a doctor.  They don’t rely on magazine articles on illnesses because, though helpful, magazines can’t diagnose, inoculate, or treat the disease. But, when the patient has been exposed to disease, not already suffering from it, a doctor is needed. Small businesses need lawyers before being sued in the same way. Making a living exposes a business to legal problems. Reading publications is useful, but it merely makes the business the equivalent of an informed patient, not a doctor.

Among the many worries for entrepreneurs who are starting or are already running a small business is the question of whether they need a business lawyer. Attorneys charge high hourly rates and many small businesses don’t have much, if any, extra capital to pay lawyers. As a result, most small business owners only hire a business lawyer when they have a serious legal problem such as they’ve been sued by a customer or employee.

Issues you can handle on your own are those that are fairly straightforward or not too difficult to learn and therefore don’t require the services of an attorney who charges $300-400 an hour. Tasks intelligent business owners should consider handling themselves are:

  • writing a business plan
  • applying for an employer identification number needed for employee tax purposes
  • applying for any licenses and permits the business needs
  • submitting IRS forms
  • completing boilerplate business forms
  • documenting LLC and close corporation meetings.

When you’re faced with an issue that is complex, time consuming, or has liability issues, you should consider hiring an attorney. Examples of those types of issues are:

  • creating a legal partnership agreement, LLC operating agreement, or shareholder’s agreement
  • creating contracts for use with customers or clients
  • creating a buy-sell agreement with your partners
  • updating your partnership, LLC, or shareholder’s agreements
  • former, current or prospective employees threatening to sue you
  • government agencies filing complaints or investigating your business
  • your business becomes involved in an environmental issue
  • buying or selling a business
  • dissolving your business
  • hiring senior or key employees or employees with access to company secrets or confidential information.

While you certainly need an attorney for serious issues, your emphasis should be focused on preventing those occurrences from happening in the first place. Prevention does not necessarily involve hiring an attorney, although consulting with one wouldn’t hurt. By the time you or your business is sued, the preventable damage has been done and the only question that remains is how much you’ll pay for attorney’s fees, court costs, and damages.

By the time a prospective employee files a lawsuit claiming gender discrimination based in part upon questions you asked at the job interview, all you can do is hire an attorney to defend you.  If you had consulted an attorney before the interview, you would have known to not ask if the applicant was pregnant or planned on becoming pregnant. A small effort at the beginning of the process could have saved you an enormous headache later.

Norma Ann Dawson is a general business attorney who focuses on risk management in the areas of business law and corporate and regulatory compliance.  For more information about Norma, see her website at www.dawsonlegal.net.

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