When embracing the entrepreneurial spirit and striking out on their own, new business owners will find themselves in need of an attorney. While the need for a good lawyer is universal, previous experience working with one is not. Business owners who have never needed a lawyer are often unsure how to go about retaining one and frequently make mistakes when doing so for the first time. Here are some missteps to avoid.
Long gone are the days when a verbal agreement and firm handshake could cement a business deal, so it’s important not to dawdle. It’s possible, however, to hire an attorney too soon. Before hiring an attorney, know what the business needs that attorney to do. In the early stages, a business may need only simple legal services like the drafting of a partnership agreement or patent filing. These boilerplate transactions need not be expensive and can often be handled by law students or inexpensive firms. There is no need to pay for the high fees of a prestigious firm just to cover the basics.
Failure to Negotiate
Although many business owners fail to do it, it’s acceptable to negotiate for legal services. Some lawyers accept a wide variety of payment arrangements, including hourly billing, flat fees and ongoing monthly retainers. Many even accept a share of equity in promising firms. Tread carefully when exchanging equity for services, however, as doing so makes the law firm a part owner in the business. Make sure to share equity only with those who make sound business partners.
Attorneys are paid contractors, and sometimes a company’s relationship with a certain lawyer comes to an end. Unfortunately, some attorney-client relationships end badly, which makes family dinners a bit awkward if the attorney was also a relative or friend. As an entrepreneur, it’s kind to support other small businesses and give work to an acquaintance. Always do so very carefully, however. As a general rule, a business owner should never hire someone he can’t fire.
As a company grows, its legal needs likely will too. In the beginning, however, it’s important to keep the legal budget realistic and hire an attorney only when needed for a specific transaction or service. The right lawyer at the right time can help establish and protect a young business without burning through the new firm’s seed money.