Why Hire a Small Business Lawyer
For small business startups, a small business lawyer can be worth their weight in gold. Money spent now to hire a small business lawyer to set up your business can save you thousands of dollars long-term in case the business becomes successful. The lawyer can help set up the new business entity, such as an LLC, and address the specific needs of your startup, whether it is a sole proprietorship, S-Corp, C-Corp, or Limited Liability Partnership. Many startups, in our experience, are successful in growing into large businesses. If this happens, the business needs to ensure that any possible intellectual property it has was properly protected from the beginning to avoid any issues with ownership or control .
Unfortunately, some small business owners prefer to simply avoid getting a lawyer involved, believing they can do everything themselves with a few online templates and some online research. They prefer to save the legal fees until absolutely necessary. Later, however, they may find that the mistakes they make by doing things themselves can end up costing them many times more than if they had only spent a few hundred dollars getting a lawyer involved sooner on the front end to set things up properly. Although you may think you always have the time, effort, and knowledge to handle things completely by yourself, it is usually not the best strategy to go forward without involving an experienced law firm in your business.
What to Seek in a Startup Business Lawyer
It is important to find a good fit in your respective areas of practice. Start up legal professionals are well versed in typical business law matters. They typically do not have the expertise to advise our clients on international or intricate securities matters. Small business startups require thorough knowledge of typical document requirements or they could set your company back years. You want to find a firm that has relationships with local banks, knows the demographic statistics for your area, other business owners, and networking opportunities.
Local Resources for Finding Small Business Startup Attorneys
Most local bar associations have a lawyer referral program. In addition to the cost-benefit analysis of going through a referral program, the best thing about bar association sponsored referral programs is that they are really responsive to your needs. If you don’t know what type of lawyer you need or your needs are specifically related to a problem with a governmental agency (such as an easement or license issue), referrals will be tailored to meet your needs. One word of caution: some local bar association referral programs only work within their county. So, that easement problem may need to be referred to a lawyer in another county that practices before the county agency.
Business Networks:
Many regions have business networks (also referred to as Interchanges) which offer members of the community the opportunity to network with each other, learn about each other’s businesses, and refer each other prospective business opportunities. Many of these networks have websites that allow users an opportunity to see who the members are and how to contact them. If you find a small business owner from whom you would like to get more information, its worth reaching out. While these groups typically have regular in-person meetings that require attendance as a condition of membership, that’s not to say that they are closed to those not currently members. Some groups offer visitors an opportunity to attend meetings once to see if it is something you would be interested in joining.
There are numerous legal directories, such as FindLaw.com and Lawyers.com, that offer search engines that will allow you to search by both area of legal specialty and geography (you can also search for lawyers based on practice group). State legal directories, like FindLaw.com and Lawyers.com have state-specific one-stop resources for consumers and lawyers in all 50 states and jurisdictions, and such directories may be useful if you have a specific technical legal problem. In addition, if you get a recommendation from someone in your geographic area, its useful to double check to see if that recommendation is listed in a local legal directory. There are numerous specialized legal directories (TechLaw Jobs – Legal Careers for Lawyers, Law Jobs – Legal Jobs for Lawyers, Lateral Lawyer – Legal Jobs for Lawyer, Lateral Lawyer – Legal Jobs for Lawyers, etc.) that service only one area of the law. If you are looking for a highly qualified specialist lawyer, these kinds of directories may be a good place to launch your search.
Desirable Legal Services Offered by a Startup Lawyer
Startup lawyers offer a variety of legal services for local small business owners to assist them in several aspects of their business operations. One of the services provided by startup lawyers is entity formation. In Texas, these business entities include: Limited Liability Companies, Corporations, Professional LLCs and Corporations, Partnerships and Joint Ventures. Entrepreneurs should consult a local small business lawyer to determine which entity type is appropriate for their new company.
Limited liability companies (LLCs) are the most common form of business entity and are governed by the Texas Business Organizations Code. LLCs provide limited personal liability for both debts and actions taken in the name of the company. LLCs allow the owners to manage the company without the same level of formalities required of corporations.
Corporations are also governed by the Texas Business Organizations Code and are the second most common form of available legal entity. Corporations are subject to certain formalities such as shareholder meetings, a board of directors and articles of incorporation.
Professional LLCs and Professional Corporations are substantially similar to general LLCs and corporations, respectively. However, they are specifically structured to comply with the Texas Professional Corporation Act. These business entities are available for the practice of certain professions such as law and medicine.
A partnership is when two or more persons form a business for profit as co-owners. It is important to note that a general partnership does not need to be in writing.
A joint venture is similar to a partnership but entails working toward a specific venture or goal with a limited timeframe.
Other services offered by startup lawyers include contract negotiation and drafting, employment agreements, partnership agreements and article of incorporation drafting. Business contracts are used to govern business transactions and create enforceable obligations between the parties to the agreement. Employment agreements dictate the employee/employer relationship. Partnership agreements serve as the governing document for a partnership or joint venture. Articles of Incorporation are used in the formation of corporations.
Startup Lawyers and Your Legal Fees
Beyond considering their competencies, it’s important to find out how a startup lawyer bill for their services. Understanding the costs involved in hiring a startup lawyer is essential to properly plan and allocate resources for your business.
Hourly Rates
One way that lawyers charge businesses is on an hourly rate. Under this structure the startup lawyer may charge a client on an hourly basis, meaning that every hour or increment of an hour that they work and communicate with a client on a project is billed to a client. It is common for clients wanting an idea of how much time will be charged and the associated cost before signing the agreement. It is also important to note that most startup lawyers have a ‘retainer’ which is usually a fee upfront to cover the costs of the initial work which is based on the lawyer’s best guess.
Flat Fees
Another common way to bill clients is to charge on a flat fee basis . This is especially common for start-up lawyers who are providing their clients with predictable amounts of work in a particular part of the overall project. A common example is a business incorporation. Many lawyers will provide this service at a flat fee to avoid excessive billing and to allow the client to more easily budget for this well-defined area of work.
Retainers
Startup lawyers may ask for a retainer whereby the client agrees to pay a retainer fee in advance, which will be used for billing as the work proceeds. The amount of the retainer may be based on the lawyer’s best estimation of the amount of time and billing that will be needed for the client. A retainer can be advantageous to the lawyer and the startup business. From the lawyer’s perspective the retainer is effectively a down payment of sorts which means they have reduced risk should the client terminate the lawyer-client relationship or not pay on time. From the business’ perspective, they can effectively get a break on the reduced billing per task.
Local Knowledge
Choosing a local small business startup lawyer can render tremendous benefits through regional expertise. Every city and state have their own peculiarities; knowing the ins and outs of a particular area can be a great advantage to a startup. If you have plans to start your business in a specific city or state, it’s a good idea to find a lawyer who understands the nuances of starting businesses in that particular area.
Familiarity with geographical regulations, state taxes, zoning laws, and even areas that are not developed yet in your locality are services that your startup lawyer can not only provide but may also offer as an added advantage. A local small business startup lawyer can give your startup a huge boost by being familiar with what needs to be done in your area to help you get your startup off the ground.
For example, if you wanted to retail luxury items or spirits, your lawyer can be of great help if he/she knows what areas in your city would be most beneficial to have your startup. Your local small business startup lawyer can also point you in the direction of where you can obtain necessary documents and file your paperwork pertaining to city permits, liquor licenses, leasing requirements and much more.
And depending on the jurisdiction in which you are setting up your startup, you may be facing additional state tax requirements. Another geographical aspect of a new business startup is your location within the city itself. Having someone on your side who is familiar with where businesses are most likely to be successful can save you a lot of time and money.
Having a local expert, ideally, that is also a small business owner can be an additional bonus. Knowing the costs, laws, rules and guidelines for a particular city or County can be incredibly valuable to a small business owner and your startup lawyer who is not from the area could miss some of these valuable insights.
How to Choose the Right Startup Attorney
After gathering preliminary information on a few potential startup lawyers, the next step is to set up an initial consultation with two or three of them. Some lawyers do free consultations, in which case it’s simply a matter of visiting their office for an hour or so. But even if a lawyer charges a consultation fee, generally minimal money can provide you with a lot of valuable information regarding the nature of your business and the services you need .
During these meetings, asking pointed questions about how the lawyer would handle your case and what kind of advice he or she would offer can help you evaluate the different attorneys’ problem-solving styles and professional demeanor. If you are comfortable with a lawyer after this initial meeting, he or she is probably a good fit for your business.