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When Should Small Businesses Engage an Attorney?

Small business owners often have limited financial resources. Start-up costs can be overwhelming, and owners must weigh competing priorities in which they invest their limited resources. It may be tempting for owners to forego seeking legal advice or retaining an attorney. However, legal counsel can provide critical advice on many key aspects, including business formation, trademark registration, securing patents, contract negotiations, employment contracts, business immigration, and employment law issues.

Considerations for Small Businesses

Small business owners should evaluate the nature of their businesses to determine whether legal counsel is necessary. For example, if the business is a sole proprietorship, an attorney may not be necessary for all matters, but it is vital to determine the issues that need legal attention. For the formation of an LLC or a partnership, the Secretary of State will have the necessary forms available to form the business organization desired. If one needs to determine which business formation is best suited for the business and its goals, it is advisable to consult an attorney to determine the type of entity that should be created. The formation of a corporation is more complicated and requires additional steps to maintain legal status in which legal counsel is advisable.

Small business owners must also determine how to comply with government regulations, wage and hour requirements, and to monetize their know-how.  Consulting with counsel prior to making decisions can avoid larger legal bills for the company down the line and provide piece of mind for business owners.  There are many legal considerations for small business owners to navigate in order to run a successful business. Many of the following legal issues may require an attorney:

Business Formation: When a business requires investments from several investors or has multiple partners, the business structure and formation will be more complicated than a straightforward sole proprietorship or partnership. An attorney can draft and negotiate investor and partnership agreements. Additionally, an attorney can evaluate the needs of the owners against the pros and cons of each type of corporate structure.

There are advantages and disadvantages to each, as one type of formation does not suit all business needs; some may offer more protection from liability. In exchange for protection from liability, corporations require adherence to formalities. If a business fails to fulfill the required formalities, the corporate veil that protects it from liability can be pierced causing legal exposure to the owners. An attorney can help business owners navigate the corporate formalities to avoid the risk of exposure.

Contract Negotiations: In order to conduct business, owners need to engage in relationships with investors, partners, clients, customers, employees, and third parties, such as vendors and suppliers. All relationships need to be governed by contracts. An attorney can draft and negotiate various contracts a business owner needs.

Contracts must be written with clarity, outline expected conduct from each party, and lay out terms of the contract so that each party is certain of what is required. Often, contracts may not lay out the specific issues a business will face. An attorney can evaluate the unique needs and challenges of the business to ensure that the contract terms adequately meet those needs.

Employment: Business owners need to be cognizant of laws protecting the fair treatment of their employees. There are laws dictating fair pay for overtime work, equal treatment, occupational safety, and payment of employment-related taxes. Employees need to be properly classified; an owner may not misclassify an employee as an independent contractor. An employer should also consult with an attorney when terminating an employee to ensure that they have appropriate policy statements and employment contracts that cover issues related to protecting business confidentiality, competition, and ownership rights.

Owners may also need to hire foreign employees with special expertise. An attorney experienced in business immigration and employer sponsorship of foreign workers can provide counsel regarding the work visas required and help with filing applications on behalf of the owners.

Securing Intellectual Property Rights: A company has intellectual property rights that can be trademarked. A business may be developing a product that may be entitled to a patent. Often, a business may be developing a product that may already be patented by a competitor. Knowing that another company already has rights to the product or technology before investing time and money in development can save costs. A business can instead try to license the right to manufacture or develop the product.

There are also copyright laws in all expressions, literature, and other material that a business produces. There may be trade secrets in recipes or other methods. An attorney can advise the owners by helping them identify all the sources of intellectual property the business has to leverage and protect them. Also, an attorney can help a business identify whether it is violating another company’s intellectual property rights so that the owners can limit or eliminate exposure.

Litigation: When faced with a lawsuit, it is important to consult an attorney immediately. When served with a complaint, there are limited time periods in which to respond. Failure to respond on time can severely affect one’s rights. If owners already have an attorney that has been handling their daily business operations or working with them, that attorney will be better prepared to handle the litigation.

Cultivate Relationships with the Legal Community

Small business owners should not underestimate the serviceability of loyal and dependable counsel to enhance their business. Your legal counsel should understand your business, work to enhance its operations, and guide you to avoid pitfalls as your business grows.  Along with accountants, insurance providers, and tax consultants, businesses should retain and cultivate relationships with legal professionals.  An attorney that works with the business from the start has a greater understanding and institutional knowledge that can be invaluable when it comes to negotiating on its behalf, as well as identifying risks and opportunities.

The small business attorneys at MacMain, Connell & Leinhauser provide well-rounded representation. Our experienced attorneys understand the special needs of small business owners and will take the time to listen and offer practical advice in a cost-effective manner. For an initial consultation, contact us online or call us at 484-318-7106. Located in West Chester, Pennsylvania, we provide legal services throughout Philadelphia, Chester County, and New Jersey.