Do I Need a Lawyer to Start My Business?

According to Business News Daily, a person can start a business for as little as $100. However, doing so may not be wise. The Small Business Administration (SBA) says people should set aside $3,000 or more to start a micro business. If opening a home-based franchise, the SBA says $2,000 may be enough. One thing a person should pay attention to when taking this step is the benefits of working with an attorney. While this representation comes with a fee, the return on investment is priceless.

Many business owners only hire a local business attorney when facing a legal problem. Getting this help before an emergency is wise. The attorney may help you save money in the long run and will be of great help when answering questions you may struggle to find answers to elsewhere. What tasks might the attorney take on for clients?

Registering the Business

Business entities may take on several forms. Some men and women set up their business as a sole proprietorship. In this situation, the need for an attorney isn’t as great. Any person who starts a business in Texas, even those who will freelance, is considered a sole proprietor. This includes the personal trainer working out of their garage or the artist selling their wares at craft shows around the state.

A sole proprietor might feel they don’t need an attorney since they are not required to file creation documents with state officials or renew any documents. Too, the individual typically reports income from this business on their personal tax return. Nevertheless, this individual personally bears responsibility for any debts and obligations of the business. The lawyer can help them protect their assets if a legal issue involving the business arises.

Limited Liability Corporations and Partnerships

When an entrepreneur is looking to start a limited liability corporation (LLC) or partnership, they must take certain steps. First, the entrepreneur must register certain entities, such as an LLC, with state authorities. Additionally, the entrepreneur needs to create documents for this arrangement. The attorney greatly assists in ensuring these documents are drafted in accordance with the law and adequately defines the agreement between members or partners.

Registering the LLC might appear to be a simple task. However, the whole process of opening the business might be delayed if the entrepreneur misses even one step. The attorney ensures this does not happen. Besides assisting with the filing documents with the Secretary of State, the attorney can draft the articles of incorporation, the operating/company or partnership agreement, filing with the IRS if necessary, and drafting initial minutes for the entity. They also ensure that all fees are paid. These are only a few of several tasks the attorney might take on. Failing to complete the necessary steps for starting the business can delay business opening, create compliance issues, and can even cause problems between members and partners who are unsure about how the entity will be run.

Corporations

Corporations must complete several tasks as well when starting a new venture. Establishing a new corporation involves several of the same steps listed above for LLCs and partnerships, but also includes drafting bylaws and other documents related to the corporation, and the ownership structure is more complex. An experienced business attorney will walk the corporation owners through the different steps of the process to ensure nothing is overlooked. With their help, the owners can begin this new chapter knowing they are protected.

Choosing a Business Structure

With several options available today, knowing which business structure to use can be confusing. Working with CPAs and other tax professionals, Attorneys handle these matters regularly and help entrepreneurs determine which structure is best for the venture they are launching. Several factors play a role in which structure is best for the venture. These factors include the number of owners, the financing, and more. In addition, there are benefits and drawbacks to each structure when it comes to taxes, liability, and other elements.

Start-up Tasks That Don’t Require an Attorney

An entrepreneur does not need to work with a business attorney for every aspect of business start-up. For example, an attorney is not needed when developing a business plan, although a mentor might be of help throughout this process. The Small Business Administration has mentors available to assist the entrepreneur in creating their plan. In addition, entrepreneurs can handle tasks such as selecting a business name and applying for a tax ID number. They may wish to work with other professionals when completing these steps, but an attorney is not required.

Furthermore, the business owner can open a bank account and complete other financial tasks without an attorney’s help. And though an attorney can make things quicker and easier, a business owner also does not need an attorney to register the business or apply for a business license. Nevertheless, there are times when an attorney should be consulted, regardless of the business structure.

When to Hire a Business Attorney

A business owner should always consult with an attorney in certain situations. For example, a business owner should always consult with an attorney before they start their business venture. This will help the owner understand the process of starting up a business and how to do it properly, even if they don’t use the attorney’s services to actually start the business. Consulting an attorney ahead of time can save the business owner time and money in the long run.

When the business faces a lawsuit from a disgruntled employee or customer, the owner should talk with an attorney as soon as possible. An attorney can help the business owner understand how to navigate employee issues and assist in resolving customer disputes.

Work with an attorney when leasing or purchasing property for the business. The attorney ensures the paperwork is correct and the business owner is protected. In addition, they are of great help in protecting intellectual property that serves as a foundation of the business or will play a major role in business operations.

An attorney may also help with the paperwork involved in trademarking the company name, filing for patents, and copyrighting material. While an entrepreneur might find an online site offering the necessary forms, these sites often lack instructions regarding how to fill them out properly. Any mistakes could lead to delays in getting the trademark, patent, or copyright desired and can put the business at risk of someone else swooping in to steal the business owner’s idea or name. A business owner puts a lot of time and money into his/her business, and any delays can be disastrous. Working with an attorney reduces the risk of causing permanent damage to the business.

Before the doors of the new business open, the entrepreneur might wish to hire employees or create partnerships with other businesses. Working with an attorney to create contracts for these arrangements is wise. These contracts might include non-disclosure agreements, sales contracts, or independent contractor agreements, along with many others.

In addition, working with an attorney allows the business owner to focus on other tasks required before the company opens its doors to clients. The entrepreneur can handle tasks that demand their attention, knowing the attorney is taking care of legal matters. The help of this professional provides the entrepreneur with peace of mind, as they know things are getting done properly without them overseeing the different steps.

The goal of working with an attorney when starting a business is to reduce the need for their help in the future. The attorney works to reduce the risk of lawsuits and other legal action taken against the entrepreneur. While there are fees involved with using a lawyer’s services, they are typically less than what one would pay to defend themselves in a legal action. If money is of concern, talk with an attorney to see if a consultation arrangement may be set up.

What is a Consultation Agreement?

With a consultation agreement, the client does the legwork. When they feel they have completed their work, the attorney reviews this work to see if changes are needed. This is one way to save money while still benefiting from the knowledge and experience of a legal professional. Entrepreneurs might find this is the perfect way to get the business off the ground the right way.

As the business grows, the arrangement may change. Expect to need more legal advice in this situation. Thankfully, as there is already a relationship established with an experienced attorney, the entrepreneur knows exactly where to turn for help.

Once the Doors Open

The partnership between the entrepreneur and attorney should not end when the doors open on the business for the first time. While the entrepreneur probably won’t need to work with the attorney daily or weekly, they should check in quarterly. If a problem does arise, the attorney will already have a working knowledge of the business. This knowledge helps them resolve the matter in less time, as they won’t need to spend time learning about the company again. Some entrepreneurs think this step isn’t necessary, only to regret letting the relationship lapse when there is an issue they need an attorney for.

Is an Attorney Really Necessary After I Open the Doors?

Many entrepreneurs, as previously mentioned, don’t think they need a lawyer until a problem comes up. However, spouses never think they need a pre-nuptial agreement when they get married. They only learn how important this document is when it is necessary to divide each spouse’s assets in divorce or death. The same goes for entrepreneurs. A disgruntled former employee may sue an entrepreneur and try to take the whole business. Don’t let this happen. This is one of countless examples of why a relationship with an attorney is important.

Working with an attorney prevents many problems before they occur. The attorney puts things in place to minimize disagreements before they occur. If a conflict arises, the entrepreneur can turn to the attorney for a quick resolution before the matter escalates. When there is a situation where the entrepreneur is in the wrong, the attorney works to resolve the matter and make sure a similar situation doesn’t come up in the future.

Miscommunication can be disastrous in the workplace, particularly for entrepreneurs. Protect your hard work by consulting with an attorney. With their help, you can safeguard the business from most calamities. That is the most important thing.

An attorney is an important part of starting and running a successful business. Having a good working relationship with an attorney from the very beginning is a great way to reduce unnecessary costs and risks associated with any business venture.

Disclaimer:

Ruelas Andino Law, PLLC makes no claims as to the accuracy of the information contained within the external links in this blog article nor does it endorse any of the businesses contained in the links. Information contained in this blog is for informational purposes only and may not be construed as legal advice.