How Hiring a Lawyer for Starting a Business Can Help
Most new business owners work on shoestring budgets, and they may not think they can afford a lawyer to advise them. However, hiring a lawyer at the outset of your business planning actually may save you money in the long run by helping you avoid potential problems down the road.
A nominal investment today in effective legal counsel could help you avoid setting up the wrong kind of legal entity, entering into agreements which later turn out not to be in your best interests, and making hiring mistakes. An experienced business attorney can serve as a trusted advisor and provide a variety of services. He or she can help:
- Select the best legal entity for your business. It used to be one of the first, most significant business decisions was to decide whether or not to incorporate your business. These days, there are so many options for business entities, and each has pros and cons. In recent years, for instance, many business owners are opting to form limited liability companies (L.L.C.) instead of incorporating their businesses.
Just like its name indicates, an L.L.C. may limit the personal liability of business owners in potential lawsuits against the company. This is similar to the protection provided by incorporation. Typically, however, forming an L.L.C. is less expensive and there are fewer legal requirements.
The type of business entity you select could affect not only your personal exposure to liability, but it could affect how you pay taxes, and how much tax you pay. Before you make a decision about they type of company you need, consult with an experienced attorney for guidance. Selecting the wrong business type could have far-reaching consequences.
- Prepare customer/client agreements. Too often, to save money, business owners draft customer proposals and contracts themselves. Later (too late) they discover they have left out critical language and created an agreement they never intended to create. The cost of hiring an attorney to review your contracts before they are signed, or even to write your contracts for you, may be nominal compared to the consequences of entering into a faulty contract.
Before you take on your first client, meet with your attorney to discuss your understanding of the arrangement—what you would like to include and what you want to leave out, ask them to advise you, and then follow their advice.
An experienced attorney will challenge you to think of options and language you may never have considered, and in the end, could save you a whole lot of money and heartache.
- Review vendor, lease and purchase agreements. Again, before you sign any agreement, spend a few dollars and have an attorney read it. Attorneys not only read contracts and advise you whether or not to sign them, but they may be able to negotiate on your behalf for better terms as well. If an attorney can save you thousands of dollars by negotiating a better deal for you with vendors, buyers and landlords, would it be worth the money you spent to hire him or her?
- Advise on best hiring, firing and employment practices. If your company will need to hire employees and/or independent contractors, you definitely want to make an appointment with your lawyer to ensure you are complying with both federal and state laws governing employer/employee relationships. It is critical you understand the proper way to classify employees versus independent contractors. If you misclassify, you may wind up paying government penalties, and it could negatively affect your business.
There are many ways an attorney can help you throughout the life of your business. It is best to form a relationship with a good business attorney at the outset, someone who can play an integral role in helping you grow and thrive, and who will grow with you.