|
Prior to the Internet, the business owner?s first encounter with an attorney was typically the incorporation of their business. However, with on line incorporation popularly utilized, many new business owners are not meeting an attorney at the inception of their business and as a result owners are not sure when to pursue legal counsel or when to establish a relationship with an attorney.
If the business is a partnership, having legal counsel is equally important as when a business is incorporated. A partnership agreement should be prepared and reviewed by an attorney to document in writing core areas of the business relationship. If one accepts that a very high percentage of new businesses will fail, the written partnership agreement includes many areas that will assist in partnership dissolution without the very high cost of litigation. This will also more easily allow one partner to continue on, when the other partner chooses to move on.
In fact, before a business structure is chosen, whether an incorporated business, partnership, sole proprietorship or limited liability corporation or limited liability partnership, it is recommended that the prospective business owner review the advantages and disadvantages of each with an attorney and accountant. There are both legal and tax implications for each structure chosen.
The new business venture will require legal documentation in a variety of other areas. Too often the attorney is contacted “after the fact” to deal with disputes or lawsuits that may have been avoided with clear and appropriate legal language. Common sense suggests that an attorney become involved when the amounts in question and/or the ongoing duration of the obligation become high. But here are some specifics:
1. When borrowing or raising money from any source.
Many businesses start by using funds from family and friends which eventually matures to borrowing from businesses such as banks, financing companies, leasing companies, venture capital firms or when raising public funds that touches on securities laws. Regardless of the source of outside funds, the associated terms and conditions should be reviewed by an attorney.
2. When establishing the sales and or purchase contracts for the business.
An attorney is familiar with the business law of the state within which the company does business. The Uniform Commercial Code is the statutory laws that apply during the sale of tangible personal property in order to achieve uniform contracts across states.
The attorney will address the basic commercial forms of your type of business, insuring compliance with any regulations affecting warranties offered, as well as contract terms for enforcement, breach of contract and available remedies for both sales and purchases.
3. When hiring both employees and contractors.
It is prudent to have a review with an attorney of the types of individuals that will be employed by the company or under what circumstances outside contractors will be used. An attorney will guide the owner through their obligations associated with each; in addition to reviewing any requirement specific to the industry and the associated work place environment.
Employment law has become critical given the number of lawsuits arising from workplace issues. Review with an attorney on how to be more aware of regulations and preventive measures. In light of this, an employment contract for a key employee is also a very critical document. The company should establish appropriate documentation at the inception of employment for all employees which should include a standardized application and employment offer letter, as well as secondary requirements such as confidentiality, non-compete, non-solicitation and specified ownership of anything created such as designs, documents, concepts etc.
4. When taking on lease obligations both for real estate or equipment.
This is an instance where the individual payment but not be substantial, but since it is an obligation that may continue for years, reviewing terms and conditions such as cancellation clauses or additional responsibilities such as insurance and maintenance expenses becomes important. Many things change, especially for a new business, and longer term contracts should be taken on only after careful consideration.
5. When you become aware of a dispute from either the government or from an attorney representing another party.
In these instances, detailed exploration of the issues being raised may best be addressed by counsel who will evaluate the seriousness of the issue and course of action. Be very cautious in providing information without first receiving counsel?s assessment and advice.
6. When business enters into legal areas requiring specialized legal knowledge.
An example of this is trademark and copyright law which has many precise requirements for fulfilling performance standards. International business transactions that may require a third party , product liability, and businesses in highly regulated industries are other examples.
The above is not a comprehensive list of situations requiring or suggesting use of legal counsel. It is a guideline to assist the new business owner as they are confronted with many areas for the first time.
It is recommended that in the early stages of setting up a business, the new owner seek out a referral from other business owners or possibly their accountant. Attorney fees are high and by establishing a contact via referral , this may provide the appropriate introduction for an attorney to do an initial overview of a business? particular needs. |
