When Does a Small Business Need a Lawyer?

The Best Time for a Small Business to Hire a Lawyer Is Before You Need One

When starting a small business, hiring a lawyer is probably the last thing most entrepreneurs are thinking about. In reality, though, it’s almost always better to have an attorney you can rely on before you start running into corporate legal issues. 

Whether starting a business or operating an existing business, legal snags like contract disputes or noncompliance with established regulations can create delays, interrupt business operations, and ultimately cost business owners money. Here’s more about the benefits of a small business lawyer—and why you should hire one today.

What Is a Small Business Lawyer?

A small business lawyer is an attorney specializing in the formation and structure of small businesses, contracts, dispute resolutions, compliance, financing, day-to-day operational issues, and so many more legal tripwires that new and existing business owners often just aren’t prepared for. These attorneys commonly deal with matters like:

• Advising on the most appropriate structure and forming a business entity (LLC, partnership, corporation, etc.)
• Drafting contracts and agreements between co-owners or investors
• Advising on liability protection and safeguarding personal assets
• Helping resolve disputes or prevent them in the first place
• Ensuring compliance with local, state, and federal regulations
• For more specialized matters, having access to experienced and well-trained legal specialists

An effective small business lawyer acts as a guide to help you make smart legal decisions in your business operations, avoiding potential pitfalls. 

When Should a Small Business Call a Lawyer?

Business owners should take a proactive approach to hiring an attorney. While disputes are a common situation that calls for legal help, realistically anyone considering how to form an ongoing business or relationship that involves more than one person should be looking into legal counsel.

As the Chinese proverb goes, “The best time to plant a tree is 25 years ago. The second-best time is today.” 

Although the best time to find an attorney is at the beginning, the second best time is today. We develop close working relationships with virtually all of our clients. Because of the ongoing relationships, our clients know us when the need arises. So, instead of beginning their search and shifting through names of unknown attorneys, our clients merely need a phone number.

The most common situations where legal help is important include the following:

Business Formation

If you’re going into business with a partner, investor, or co-founder, this is one of the most important times to work with a lawyer. As Merritt Law often reminds our clients, a corporation or LLC isn’t just another term for your business—it’s a contract between parties that spells out how you’ll operate, who makes decisions, how finances work, and what happens if things fall apart.

Common questions a business might face in these early conversations include:

• What is the best legal structure for liability and tax purposes?
• How do we protect our personal assets?
• Who has control over what decisions?
• How are we financing the business?
• What happens if a dispute between the participants arises?
• What if one of the participants gets divorced, dies, goes bankrupt, or simply wants out?

Many business owners will search for templated contracts, but these online legal forms rarely cover all these bases. Ultimately these business owners will come to a corporate lawyer after they realize the generic documents they used didn’t actually protect them. By then, the situation may be harder—and more costly—to fix. 

Most importantly, an experienced business legal firm like ours has developed forms through the years that address most recurring issues we see. Based on our existing form database, we are able to generate excellent organizational forms tailored to our business clients’ unique legal needs quickly and inexpensively.

Drafting and Reviewing Contracts

Even if your business partner is your best friend, you need a clear agreement in writing. This helps everyone understand expectations and prevents misunderstandings. A well-drafted operating agreement or shareholders agreement can be the difference between a thriving business and a costly breakup.

Further, virtually every business is presented daily with proposed contracts. This could be everything from a purchase agreement, a contract for execution of a service, a lease, and much more. 

If a business owner fails to retain an attorney to review contracts, it is hard to overcome hidden pitfalls. This is because courts typically enforce contracts agreed to and executed by contracting parties. Likewise, and perhaps most importantly, having good understandable contracts is one of the most important steps to avoid expensive disputes. 

For almost 40 years, Merritt Law attorneys have reviewed hundreds of contracts involving virtually everything a new or existing business may see in a contract. Contract review is one of the most important things we do for all of our clients.

Resolving Disputes

Our legal team is frequently called in when our clients encounter issues such as internal or external disputes, accidents involving employees or third parties, regulatory snags, and other pressing matters that may be adversely impacting the business. 

Often, disputes arise quickly and swift response is paramount. Having a trusted legal advisor in place who is familiar with the business can provide significant advantages.

Realistically, business owners should consider taking a proactive approach to dispute resolution. If a business has developed an existing relationship with a lawyer early in the business formation process or before any disputes arise, they’re more likely to avoid most disputes altogether—typically saving both time and money.

How to Find a Small Business Lawyer

Finding the right attorney for your business can make all the difference. The right lawyer will be a trusted partner who will walk beside you throughout the business journey, providing advice and legal services as needed and freeing you and associates to focus on what you do best: successfully operating your business.

As you search for an attorney, prioritize attributes like:

• Glowing reviews or direct referrals
• Expertise in your industry and local area
• Cost transparency
• Communication
• Personal interactions with the attorney (do you trust and like the attorney?)

Finding an attorney who understands business success depends primarily on good business decisions by the client, and who does not try to provide unsolicited counsel on business matters outside what the client requests.

If possible, business owners should schedule a consultation with any potential lawyer before hiring them. If nothing else, this conversation will give you a much better idea of their personality, which will be critical for building a long-lasting relationship.

Don’t Wait Until It’s Too Late!

Starting and operating a business is challenging enough—there’s no reason to add difficulty and risk by forgoing legal counsel as you create and grow your business. If you’re ready to get started—or you’re not sure whether you need a lawyer yet—reach out to our team at Merritt Law. We’re dedicated to providing peace of mind to our clients and a solid legal foundation for businesses to thrive on for years to come.