Last fall, Laura and I had the privilege of presenting at the Small Business Summit for a marketing company that we have partnered with for over a year now. As lawyers, we were asked to present on the topic of the legal needs that businesses should consider when they are getting started. Given that Laura and I were in the thick of building our new firm, this topic was ENERGIZING for us – we have been living through it ourselves, and our experiences (as with most of what we do and create) was leading the way at the Summit.
When we were asked about the legal needs that business owners must consider and/or anticipate as early as possible, we believe that the following 4 needs are crucial for any business – whether it is brand new or has been in operation for quite some time:
- The Business’s Legal Structure
- Governing documents and agreements
- Employment agreements and policies
- Customer/Vendor contracts
The Business’s Legal Structure
When starting a business, an owner must decide whether it should form a sole proprietorship, a partnership, a limited liability company, or a corporation. The legal structure will be dependent upon several factors, such as the number of owners, the tax consequences, the liability, and your vision for the business in the short- and long- term. We always strongly recommend that you work with both your attorney and your tax professional to understand the tax implications that could be involved and whether a structure many be more suitable than another.
Governing documents and agreements
For this, one of our favorite sayings is, “Plan for the worst when things are the best.” At the start of a new business or partnership, it can feel exciting – almost like a honeymoon phase. Because of this, you want to make sure that you negotiate your operating agreements, partnership agreements, and any other governing documents upfront so that you can protect the business – and your business relationship – when everyone is excited to dive right in. The worst time to consider these agreements is when you’re in the midst of a business dispute or facing the wind up of your entity in its entirety – when, presumably, stress and tensions are running high. Instead, prepare your agreements, by-laws, etc. at the start and make sure they are in place. If you need to amend them as the business continues to evolve, that is fine; but having something in place at the start is crucial for a business.
Employment agreements and policies
If you are running a business that has employees, this legal need cannot be overlooked. It is imperative to consult with an attorney to determine what the nature of the employer-employee relationship is, whether an employment agreement should be executed, and what kinds of employment regulations may be applicable to the business. Do you, as the business owner, understand the regulations governing paid leave or sick leave? Are the regulations conspicuously posted or distributed for your employees? What human resource policies or contacts have you established in the event of a complaint or intraoffice dispute amongst colleagues? As you can see, we have not even scratched the surface in examining all of the legal needs that expand when the first employee is hired. Thus, hiring an attorney to consult with you as general counsel to your business in this capacity should not be overlooked.
Customer/Vendor Contracts
Our firm works with various businesses that provide goods and services across multiple disciplines to their clientele. There is never a “one size fits all” approach to the kind of agreement that your business may need for its customers or its vendors. As general counsel to these businesses, we get to know the business, its owners, and its customers so that we can better understand the needs that need to be accounted for in a contract. At a minimum, a customer or vendor contract needs to define the scope of the goods or services being exchanged between the parties, the terms of payment and default, and any necessary provisions requiring insurance coverage. When working with our business clients, if we see that there is a running, recurring theme in the problems they are facing with their clients/customers, one of the first places we turn to is the agreement to see if the terms governing the dispute are clear enough or if they need to be tightened up in such a way that this dispute can be avoided in the future. While you are busy running and building your business, it can be instrumental to have an attorney – with a different eye for spotting the issues that you are facing – on your team and helping protect your business going forward with strong legal contracts.
As stated above, these legal needs are universal to the brand new business and the veteran businesses that, perhaps, have not evaluated their needs in quite some time and/or have not accounted for the changes to their business, business model, clientele, etc. over the past several years. It is never too late to reexamine your business and determine where an attorney could be a valuable partner in protecting the business
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.