When Should a Small Business Hire a Business Lawyer?

Legal Article

When Should a Small Business Hire a Business Lawyer?

One of the most difficult questions small business owners must ask themselves on a daily, weekly, or monthly basis is whether what they are doing requires the guidance or assistance of a business lawyer. Most small business owners think that attorneys charge high rates that are unaffordable with any extra capital the business is bringing in. Thus, most small companies resort to hiring an attorney only after an issue has occurred. These issues could encompass a consumer lawsuit, a supplier breaking a contract or another extremely problematic occurrence. However, what most small businesses fail to see is that seeking legal help early and often will typically prevent the most common legal issues businesses face—lowering the overall cost of operations.

While you do not need to consult an attorney with every matter you encounter, using an attorney when it is necessary can end up saving you thousands or even millions of dollars throughout the life of your business. Below is a description of instances that may not require an attorney, times when you should consult a business lawyer, and why you should try to prevent legal issues before they can ever occur.

Issues You Can Handle on Your Own

Certain matters you will encounter while you create, run, sell, or close your company does not require legal assistance as they are either straightforward or easy enough that you can figure them out after a small research period. The following list includes the most common tasks business owners should consider working through themselves.

  • Writing a business plan
  • Researching and picking a name for your business (previously trademarked business names can be researched online)
  • Reserving a domain name for your website
  • Applying for an employer identification number (EIN), which you will need for employee tax purposes
  • Applying for any licenses and permits the business requires
  • Interviewing and hiring employees (there are federal and state anti-discrimination laws that regulate the hiring of employees)
  • Submitting necessary IRS forms
  • Documenting LLC meetings
  • Hiring independent contractors and contracting with vendors
  • Handling audits initiated by the IRS

The list above does not include every business issue that does not require an attorney and in some cases—depending on the circumstances—the issues above may necessitate legal help. Further, if you are a well-funded business or have access to cheap or free legal help, consulting an experienced business attorney is always a good idea.

Issues Where a Business Lawyer Can Help

Most intelligent business owners can handle any of the issues above. However, when a business faces time-consuming and complex issues that could lead to potential liability, the best decision to make is to consult and retain an experienced business attorney. Below are a few cases where a small business should consider hiring an attorney.

  • Former, current, or prospective employees suing on the grounds of discrimination in hiring, firing, or hostile work environment
  • Creating contracts for use with customers, clients, suppliers, or other business partners
  • Local, state, or federal government entities filing complaints or investigating your business for violation of any laws.
  • You want to make a “special allocation” of profits and losses or you want to contribute appreciated property to your partnership or LLC agreement
  • Creating a legal partnership agreement, limited liability company (LLC) operating agreement, or shareholder’s agreement
  • Creating a buy-sell agreement with partners
  • An environmental issue arises and your business is involved (even if your business didn’t cause the environmental problem, you may be penalized)
  • Updating any partnership, LLC, or shareholder’s agreements under which you are currently operating
  • Negotiating for the sale of your company or for the acquisition of another company or its assets

Prevent Issues Before They Happen

You should definitely consult an attorney to help you work through the issues stated above. However, your real focus should be put into preventing legal issues from ever even happening. While you may not require an attorney’s help to mitigate every issue, a knowledgeable and experienced business attorney will play a key role in securing your business overall. Preventing legal issues before they happen will be crucial to your business’s success as once you are sued, the only question you will have left to answer is how much will the damages, court fees, and attorney’s fees cost you.

One of the easiest ways to protect your business legally is to—at the inception of your business—creating a consultation agreement with an attorney you trust. This agreement will allow you to do a significant portion of the research while still receiving the legal guidance that will be key to your success.

There are two common situations that our group of Washington D.C. attorneys sees that could have been easily prevented if a business utilized an attorney.

Business Contracts

The first scenario involves a business owner creating their own contract to use with a business partner or supplier who then exploits this agreement. While you may think that you can easily create your own contracts, by not having a business lawyer draft, or at least review your contract, you are opening yourself up to serious legal and financial issues.

Mergers and Acquisitions

The second common issue we help clients with that could’ve been avoided is when they look to sell their business or acquire another company. Most people think that when they purchase a company, it is implied that they will receive all of that business’s assets. However, depending on how a company is structured, you may only be receiving the supply side of the business when you were also expecting to acquire the storefront or other real estate assets.

In both of these situations, the businesses described could have saved themselves significant time, money, and stress by consulting a business lawyer before moving through with the transactions. Attempting to save money and then later paying a significant amount more to remedy the result of this poor planning is all too common among most small businesses. While you do not need an attorney to help you through every part of your business operations, this article hopefully gave you a sense of common issues where an attorney is extremely useful.

Contact Our DC Law Office for More Information

Finally, for more on when should a small business owner hire a business lawyer, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding business and tax law, check out our blog.