When Do I Need a Lawyer?

Entrepreneurs have plenty on their plate and the last thing we want to do is to learn the law. That being said, there are lots of things that entrepreneurs can do on their own without incurring the expense of a lawyer. However, with other more complicated matters, it is important to turn to professionals that have seen the issues you are facing many times.

“However, with other more complicated matters, it is important to turn to professionals that have seen the issues you are facing many times.” 

While you certainly don’t need an attorney for every step of running your business, there are certain issues that are better managed by a lawyer. We outline some of the items you should be able to take on on your own. Keep in mind that for some of these, you may find that you start working on it and it seems too complicated. In those cases, don’t hesitate to go to a lawyer. In addition, there may be some tasks that you get started and then need a lawyer to finalize.

Tasks to Try on Your Own

There are certain matters that are fairly straightforward and/or not unduly difficult to learn and therefore do not require the services of an attorney. The following is a list of some tasks that business owners should consider taking on themselves. Keep in mind that there are many self-help and online resources you can use.

• Writing a business plan
• Researching and picking a name for your business (previously trademarked business names can be researched online)
• Reserving a domain name for your website
• Creating a legal partnership agreement, limited liability company (LLC) operating agreement, or shareholder’s agreement
• Applying for an employer identification number (EIN), which you will need for employee tax purposes
• Applying for any licenses and permits the business requires
• Interviewing and hiring employees (there are federal and state anti-discrimination laws which regulate the hiring of employees)
• Submitting necessary IRS forms
• Hiring independent contractors and contracting with vendors
• Creating contracts for use with customers or clients
• Creating an employee handbook

The above is not a full list of legal tasks which small business owners can do on their own but should give you an idea where you can give it a go.

Tasks Where You Need a Lawyer

There are times when a business faces issues that are too complex, too time consuming, or fraught with liability issues. At that point, the wisest move is to retain a business lawyer. A few examples include:

• Negotiating investment documents such as loan agreements or equity investment documents
• Finalizing founder agreements
• Negotiating non-standard agreements with customers
• Former, current, or prospective employees suing on the grounds of discrimination in hiring, firing, or hostile work environment
• Updating any partnership, LLC, or shareholder’s agreements under which you are currently operating
• Handling audits initiated by the IRS
• Local, state, or federal government entities filing complaints or investigating your business for violation of any laws.
• You want to make a “special allocation” of profits and losses or you want to contribute appreciated property to your partnership or LLC agreement
• An environmental issue arises and your business is involved (even if your business didn’t cause the environmental problem, you may be penalized)
• Negotiating for the sale or your company or for the acquisition of another company or its assets

Self-Help Legal Services

There are many self-help legal services that provide you forms, templates and tools to create many of the legal documents you need for your business. This includes many documents such as:

• Formation documents for new companies such as articles of incorporation, by-laws, LLC operating agreements, and partnership agreements
• Employee handbook and policies
• Non-disclosure agreements
• Independent contractor agreements
• Intellectual property assignment agreements

See “Tools” for a list of the top self-help legal resources.

Creating a Relationship with a Lawyer

To prevent unnecessary attorney costs at the inception of your business as well as tremendous costs after a lawsuit has been filed, you might consider a consultation arrangement with an attorney. Such an arrangement would entail you doing most of the legwork of research and the attorney providing legal review or guidance. For example, you might use self help and online sources to create a contract with a vendor and ask an attorney to simply review and offer suggestions.

When you are creating this relationship, look for lawyers that:

• work with startups
• are willing to be flexible and discount fees
• will not charge you for each and every interaction
• are willing to invest some of their time to earn your business

Consider when to use and lawyer, and when you do, try to find one that understands what it’s like to sit in your shoes.