When you start a business, you may want to allocate your time and resources to building and growing your company by developing your products and services, as well as acquiring customers. As a result, you may want to consider skipping hiring legal counsel to assist you with business formation and the launch stage. But do you need an attorney to start a business?
The Appeal of the DIY Approach
In recent years, numerous online services have appeared to offer entrepreneurs a “do it yourself” approach to forming a new legal entity. These services have gained popularity among new business owners, leading them to skip hiring legal counsel, as some entrepreneurs may view DIY platforms as simpler and lower-cost. However, forming a new business goes beyond filling out and submitting paperwork to the state. Starting a company should also involve careful planning to ensure robust legal protection for the business’s owners and to create a legal structure that serves their specific needs and objectives.
Key Legal Decisions That Benefit from an Attorney’s Guidance
Some of the most critical decisions during the business formation process that may require legal counsel from an experienced attorney include:
- Choosing an Appropriate Business Structure – An attorney can help founders select a suitable legal structure, such as a partnership, limited liability company, or corporation, based on their needs, concerns, and business goals.
- Negotiating and Drafting Foundational Documents – Attorneys can help entrepreneurs craft customized governance documents, such as bylaws, operating agreements, partnership agreements, and shareholders’ agreements. Having tailored foundational documents can become particularly important for new companies with multiple partners, as these agreements will help ensure partners understand their rights, roles, and responsibilities.
- Compliance and Licensing Requirements – A business lawyer can help founders identify and comply with their regulatory and licensing requirements under local, state, and federal law, including professional licensing, business permits, and land use or zoning approvals.
- Initial Contracts and Client Agreements – When a business starts operations, it will need written agreements with employees, vendors, and customers. An attorney can help new entrepreneurs negotiate and draft these key agreements to protect the business at its most critical stage.
Avoiding Common Startup Legal Pitfalls
Some of the biggest mistakes that entrepreneurs make by not seeking legal counsel when starting businesses include:
- Not structuring the business to separate personal and business finances, including not having a separate legal entity or bank accounts, or not adequately capitalizing the business
- Overlooking intellectual property matters, including developing trademarks or protecting copyrights, trade secrets, or patentable inventions
- Mishandling employment law matters, such as worker classification and wage and hour compliance
- Failing to establish detailed corporate governance procedures, especially when having multiple partners in a business
Hiring legal counsel can help you avoid many of these mistakes, as an attorney can identify matters that you must address when starting your business so you can develop an effective plan or strategy from the outset. Having to fix problems caused by errors or oversights later on may cost you and your business more time and money than seeking legal counsel to address the issue from the beginning.
When You Might Not Need a Lawyer
Entrepreneurs might not need legal counsel when starting as freelancers or when launching a microbusiness. However, even freelancing or microbusinesses can have legal risks for entrepreneurs, such as professional or product liability. As a result, entrepreneurs in these roles might pursue cost-effective alternatives to obtain critical legal advice, such as flat-fee review or limited-scope fee arrangements.
Contact a Business Attorney Today
The complexities and challenges that can arise in starting a business make it critical to have an attorney to advise you on your options and help you avoid pitfalls that might jeopardize your new company. Contact Lancaster Tech Law today for an initial case evaluation to learn more about how we can assist you through the process of starting a business.