When establishing a new business it is extremely important that you fill two positions before doing anything else. The first is an accountant and the second is a lawyer. While the accountant will manage all your expenses and income besides your tax compliance, the lawyer will provide vital services such as instructing you on the best form of the business entity, zoning compliance, potential lawsuit liability, protection of patents, trademarks, brands and copyrights, etc. so that you can protect your interests better and stay out of trouble.
Most people tend to look at lawyers only when they are being sued by someone else or when they need to sue someone. Engaging lawyers at this stage is basically a firefighting exercise because the problem has already taken place and all you can do is to try and minimize the damage while incurring a lot of expenses by way of legal fees and settlements. While nobody really likes to deal with lawyers or pay them their usually astronomical fees, it is best to engage lawyers to prevent problems from happening and in the process pay a small fraction of the amount that needs to be incurred when actually fighting a lawsuit.
Types of Attorneys
Since legal matters are exceedingly complex and need a lot of specialized knowledge, lawyers too have become specialists, just like doctors. For a typical business organization, you will require a lawyer who will be able to advise you on the type of business entity that should be formed as different business entities have different advantages. The lawyer will also prepare and file the paperwork needed for the formation of the business. You will also need the services of a lawyer to draw up the standard contracts that need to be executed with customers, suppliers and clients as also to respond appropriately to contracts needed to be signed by you.
Lawyers will also be able to help you out with office, retail store, and factory space leases so that they are negotiated properly and not loaded in favor of landlords as is the typical scenario. In case your business needs any license to operate, your lawyer will also be able to identify the ones that are required and help you to apply for them. Although your accountant will keep track of the financials, the taxation compliance will have to be ensured by your tax lawyer. Further, your lawyer will assist you to file for patents, trademarks, copyrights and other intellectual property rights and be able to vigorously protect your rights to them.
The Law Firm Size
Most small businesses tend to shy away from the larger law firms because they tend to be more expensive due to larger overheads. Also, some of the bigger law firms really don’t like having customers below a certain size as they are unable to maximize their billings. However, while you can start off with a law firm that is smaller and has the time to listen to you; in due course, you would need to a larger firm that would be able to cater to all your multi-dimensional issues under a single roof. Another advantage of hiring a large law firm is that they carry a lot of clout in the legal community that can make your life considerably easier. Working with a well-established law firm also can give you many connections to sources of finance or technology that will come in handy when you are expanding and going in for a debt placement or a public offer of equity.
It can be a really tricky job trying to hire the best possible lawyer for your business needs. You need to establish the law firm’s credentials and experience as well as find out if they have exposure to the type of industry that you are operating in. However, stay away from law firms that your direct competitors use. List out your potential requirements right from the incorporation of the business to initial public offering or even copyright protection and quiz your lawyer about the proficiency they have on each aspect. If they don’t have a particular competence they should have a working relationship with another firm that does. The true test of a good law firm is that it should have the time to listen to you and appreciate your problems and then go about finding suitable ways of addressing the problem while taking the trouble to explain the situation to you in a language that is clear to you. Hiring lawyers can end up being prohibitively expensive so you should take the effort of finding a law firm that is flexible on its billing and willing to lower its fixed fees or hourly rates to accommodate your growth status.
Author bio: Martin Smith is a partner of a boutique law firm that specializes in legal issues faced by small businesses. Martin has written a number of articles on the importance of the right selection of business entities at the time of business formation.