For most people, going through life without speaking to a lawyer is an accomplishment. It means they’ve managed to keep themselves out of trouble.
For business owners? Going that long without legal help is actually a sign of concern. It might mean that you aren’t protecting your business and you’re leaving yourself open to liability.
A LegalShield survey found almost 60 percent of small businesses had experienced a significant legal event in the two years prior to the survey, but most didn’t hire a lawyer. Even though they all said legal issues were among the “greatest threats to their business.”
Yikes.
It’s a common story though. Startups attempt to bluff their way through everything to save on costs—but they don’t realize the impact this can have later on.
For Michelle Green, the founding attorney at Chicago law firm G&G Law, hiring a business lawyer is a question of resource management. Do you really think you have the knowledge and expertise to steer your business through legal issues?
“What energy are you going to spend on that, versus increasing your growth? What makes you most comfortable at night?” Green asks.
When do businesses need a lawyer?
So, when is it a good idea to get a lawyer involved in your business?
When you register your business.
While you’re certainly able to do this yourself, Green says that it might be a mistake—particularly if you aren’t sure how to structure your business to reduce your liabilities.
When you create your first contract.
Your first contract is a big milestone and a significant step in your company’s history. But you shouldn’t go it alone, says Green. A lawyer can help you craft a template with carefully structured language
When you hire your first employee.
You might think hiring a lawyer for your first employee is overkill, but you’d be wrong. While doing the paperwork may be simple enough on your own, Green says some small businesses fall into trouble when it comes to correctly classifying employees and contractors.
A lawyer isn’t just for resolving disputes—they are great for shutting them down before they even happen. Green says a lawyer can help you reduce the number of situations where you find yourself liable.
“For example,” Green explains, “if there is a payment plan, you set up a structure so that payments are made in two weeks. And if payment isn’t made, the business can stop doing the work. This can mitigate the amount of damages so that expensive litigation or dispute resolution isn’t necessary.”
When others invest in your business.
Depending on the structure of your business, not only do you need to determine how shares are split, whether any specific shares have preferential treatment, and how those shares will vest, Green says you also need to determine how you will prepare for future investments down the road.
A lawyer can help you there by drafting language that provides a concrete framework for inviting in future investors—one less open to interpretation.
How to find affordable small business legal advice
Cost is always an issue in a small business, and lawyers aren’t cheap.
Cash flow is so important at the beginning of a business lifecycle, so it’s understandable that you’d only want to shell out in emergencies. That said, being proactive about getting legal help can actually help keep your costs down by preventing your business from landing in hot water.
We asked Vuki Vujasinovic, the founder and CEO of Sling & Stone, a PR firm that specializes in technology, how he managed this for his company. As a startup founder, Vujasinovic has “thankfully” steered clear of any major legal hurdles, and he says there are plenty of things you can do to protect your business legally—without breaking the bank.
“The sooner you start caring about this, the better it is for your company in the long run,” he says.
Tip #1: Find a lawyer who gets small businesses.
Law firms come in all shapes and sizes. As a small business, it can be a mistake to approach a giant law firm with the expectation that you’ll be given priority status—or a good deal.
“I’ve seen startups choose law firms that were simply the wrong size or scale for them, and it doesn’t end well,” Vujasinovic says.
Sling & Stone, on the other hand, works with a boutique firm: “We get great advice, we’re able to be frank about the scope of certain requests, and they truly get our business,” he says.
Vujasinovic recommends approaching a smaller firm before you even need their services, so you won’t be a “small fish in a big pond, and they take the time to genuinely understand your business.”
Green also suggests seeking out law firms that specialize in your particular type of business.
“Do you engage with clients? Then your client contracts are going to be the most important,” she says. “Do you need 30 employees? Then you need someone to focus on employment issues. If you have a bounce house company for birthday parties, then having a waiver and release form—with insurance—is the most important thing. It all depends on your business.”
Look for a legal firm that offers the specific expertise you’re looking for instead of paying top dollar for services you don’t need.
Remember, a lawyer is someone you’ll engage with multiple times. They need to know the details of your business, how you operate, and even your personality.
Think of your lawyer as a partner in the business, just without the equity. Once you frame the search in that mindset, it becomes easier to decide who you’ll keep around for the long haul.
You have to work with this person over time. So… do you actually like them? Do they take the time to explain details to you and make sure you understand them, instead of just throwing documents at you to sign?
They may even help you in ways you never imagined. Take Vujasinovic’s boutique firm for example: “They helped us turn one of the most common and relatively mundane agreements in the PR agency world—a service agreement—into something of a talking point for us and our client,” he tells us.
Bottomline: Find a legal firm at the right size and with the right skills—and you’ll be sitting pretty like Goldilocks.
Tip #2: Be very clear and specific about what you need.
Vujasinovic says you should try and figure out any budget or resource constraints as soon as you can, then let your lawyer know about them straight away.
“Having these conversations upfront, rather than when you get the bill, will make for a better partnership,” he says.
It just means you’re starting out on the right foot. For instance, start a conversation with this:
“I’m about to hire two employees and I need help making sure I have the right documentation in place, both for them and my business. I can only spend about $2,000 at this time.”
This is great because it’s specific, and you know exactly what you’re getting.
But if you ask a lawyer to set up multiple contracts, a service agreement, and conduct a risk assessment for your business, you’ll be disappointed when you find that’s going to cost you thousands of dollars more than you can afford.
Understand your constraints, and talk about them upfront.
Tip #3: Use online services together with in-person help.
Should you use online services like Rocket Lawyer or LegalZoom, or use a dedicated firm? According to Vujasinovic, there’s no reason you can’t mix and match.
“I think there’s a place for both types of work,” he says. “There are certain conversations you’d rather have face-to-face with a lawyer you trust, and other aspects of scaling a global business where some templated or automated advice might be sufficient.”
If your questions are a little more complex than completing a routine form, things like:
- Hiring or firing questions
- Questions relating to intellectual property
- Equity disputes
…it’s probably best to speak with someone in person.
Your legal needs are unique, just like your business. The more you’re able to convey your unique needs, the better legal services you’ll receive—for the right price.
So be prepared. Understand exactly what you need, seek out a legal firm that works in your niche, and look for someone you can partner with and trust.
And above all, don’t be afraid to ask for help straight away. When it comes to legal services, the earlier the better.
