If you are wondering whether or not to hire a business lawyer when you are starting a new business venture, there are at least three reasons that make the decision a no-brainer: 1) An ounce of prevention is worth a pound of cure; 2) You are establishing a legal entity with legal requirements and legal ramifications—making sure it is all legal is pretty important; and 3) Businesses are filled with liability issues. Frankly, hiring a business lawyer makes good business sense.
An Ounce of Prevention
As a firm that deals with a lot of business litigation, it is not uncommon to encounter clients who did not consult with a business lawyer when they either started their business, hired employees, or entered into business contracts. Now faced with a much larger legal issue—the pound of cure, if you will—the costs, both financially and emotionally, are exponential in comparison to the costs of setting things up well with a business lawyer in the first place.
Just like it would be incredibly risky to drive a car without adequate insurance coverage, starting a business without consulting a business lawyer is especially risky as well. One accident without auto insurance can wipe out all of your assets, and so too can one lawsuit against your business. While a business lawyer cannot guarantee you will never be sued, working with a business lawyer can significantly reduce that risk, let alone reduce the level of risk for which you might find yourself liable.
Bringing or defending a lawsuit can cost tens of thousands of dollars in legal fees. The actual costs of the liability can be astronomical. Working with a business lawyer in the formative stages and throughout the life of your business can mitigate that exposure at a fraction of the cost of litigation.
It’s a Legal Entity That Requires Legal Expertise
Unless you are establishing a sole proprietorship or some forms of partnership, one of the key things you are doing in establishing a business is that you are creating a separate legal entity. What does that mean? It means that the business is not you personally—it’s separate from you. And just like you have legal rights and duties as an individual, your business has legal rights and duties too. A business lawyer can help you sort that out.
As an individual you have the ability to enter into contracts, to sue, and to be sued. When you enter into contracts, for example, you are responsible to perform on the contract, and you can enforce performance of the other party. If one party fails to perform, the other party can take legal action to force the breaching party to either perform their duties or pay money damages.
The same is true for your business. As a separate legal entity, the contracts your business enters into are legally enforceable—both by your business and the other party to the contract. Working with a business lawyer to make sure your business interests are protected is vital.
Business contracts are not the only legal issue that requires the expertise of a business lawyer. Choosing the right business structure is a legal designation with both tax and legal ramifications. So too is it important to hire a business lawyer to draft and review ownership agreements.
Liability Issues Abound
Not many people launching a new business are thinking that a lawsuit might be waiting for them around the corner. But if they did, they might plan that launch differently. Just as you would double check that all of your doors and windows were securely locked if you knew a burglar was likely to show up in your neighborhood, so too would you plan your business activities with more vigilance if you expected you could be sued, especially as it relates to employees and customers.
Employment-related lawsuits are far more prevalent than you might expect, with employers being hit with claims for discrimination, wage and hour disputes, and wrongful termination, to name a few. Customers might sue for defective products, personal injuries, or breach of contract.
As an example of the liability exposure for employment-related issues, a business can be held liability for two years’ of salary for an employee who wins a wrongful termination suit, plus all of the legal fees and costs. Employing a business lawyer to provide advice regarding the hiring, developing and firing of employees can save a lot of time, energy, and money.
There are many other reasons that hiring a business lawyer makes good business sense, of course, including protecting intellectual property, ensuring the right insurance coverage, drafting partnership or shareholder agreements, and correctly filing the required documents with the Secretary of State, maintaining compliance with local, state, and federal laws.
The benefits of hiring a business lawyer in launching and running your business are well worth the investment. The short- and long-term benefits far outweigh the costs. And the return on investment will be significant. In other words, it just makes good business sense.