When does a small business need a lawyer, and when can you do it yourself? Understand when it’s time to call in the pros.
By Rieva Lesonsky
As an entrepreneur, you spend most of your time focused on the day-to-day tasks like managing your staff, helping customers and marketing your business. It’s easy for legal concerns to take a backseat—but that can be dangerous. Unless you take the proper steps to legally protect your business, everything you’ve worked so hard for can be at risk.
When does a small business need a lawyer, and when can you take the DIY approach? Here’s a guide.
When does a startup need a lawyer?
- Business structure: Plenty of legal self-help resources can be found online that can help you form a corporation, partnership or LLC on your own. (Rocket Lawyer, LegalZoom and Nolo are three of the most popular legal self-help websites.) In general, most startups can handle their business formation this way. But if your business is complex—for instance, you’ve got dozens of investors, or two or three owners are each contributing intellectual property—consulting with both an attorney and an accountant is a smart move. These experts can help you examine the pros and cons of different forms of business and assist in all the legal paperwork.
- Patents and trademarks: You should always trademark your business logo and other identifying brand marks. The U.S. Patent and Trade Office website has plenty of self-help advice to guide you, and in most cases, filing a trademark is pretty easy to do on your own. However, the patent process is more complex, and making a mistake could cost you your big idea. It’s wise to consult an attorney who specializes in patent law to help you through the maze.
- Creating contracts: In any business relationship, you should have a contract to protect yourself and your business. The contract should be clearly written, outlining the scope of work, how and when you’ll be paid, and what happens if something goes wrong. You can find templates online and use them to create contracts for basic business situations, such as hiring a contractor or delivering a service. But you should have an attorney review your contracts to make sure they’re complete, and have an attorney review any contracts that clients want you to sign.
When does an existing business need a lawyer?
- Debt collection: Unfortunately, at some point or another every small business owner has a client or customer who doesn’t pay their bill. Debt collection may not work, so if you need to take the client to court, you may want an attorney to offer advice or represent you (if it’s a larger claim).
- Hiring employees: The minute you hire employees, your business is subject to dozens of state and federal laws. An employee handbook is an essential tool for setting out your policies and complying with laws. You can use self-help legal resources such as SCORE’s resources for writing an employee handbook to draft an employee handbook on your own. However, a lawyer should review and fine-tune it to ensure your employee policies follow the rules.
- Terminating employees: Need to fire an employee? Consult a lawyer first. Some 30% of small businesses worry about getting sued, and in termination cases, it’s a real risk. A lawyer can make sure you’ve followed all the proper steps before terminating the person.
Lawsuits: Even the smallest businesses can get sued, and if you’re hit with a lawsuit, you’ll want an attorney on your side. Scrambling to find a lawyer when you’re in a panic doesn’t always yield the best results. Start a relationship with a lawyer now—before you need one—and you can feel confident you’ve got a professional on your side in case of emergency.
Knowledge is power
Legal issues can be intimidating for small business owners. Knowledge is power, so educate yourself as much as possible. Legal self-help sites such as the ones I mentioned above will give you an overview of legal issues that affect small businesses, as well as forms, templates and other tools you can use to handle simple legal matters yourself.
To avoid legal problems, think ahead during every phase of your business. From choosing your business name to negotiating a lease with a landlord to hiring your first team member, entrepreneurship has plenty of potential legal traps that can harm you if you’re not aware. Knowing your legal rights and understanding your responsibilities during each stage of business growth will help protect both you and your business.
Professional woman meeting in office stock photo by Monkey Business Images/Shutterstock