55 Lawyers Reveal What Small Business Owners Should Know
You’ve started a business and approached a lawyer to ask some questions, but do you know what to ask? What topics need to be covered before hiring a legal team?4 min read
You’ve started a business and approached a lawyer to ask some questions, but do you know what to ask? What topics need to be covered before hiring a legal team? What’s most important once your team is in place? And why do these questions matter?
Here’s what we learned.
The Key Queries for Your Lawyer
For startups, incorporation and intellectual property are the most important topics to tackle with your lawyer. Proposed questions from our 55 legal professionals include:
- When should I form a business entity for my new venture?
- What legal entity form should I use?
- How should I structure my entity?
- Does my business or product name infringe on someone else’s trademark?
- Do I need to consider intellectual property as part of my startup costs/budget/protection?
If you don’t already have a lawyer, it’s important to vet your options before hiring. Our respondents suggested asking:
- What hands-on experience has the lawyer had with startup businesses, and how long did the lawyer represent the business after initial formation?
- How can the lawyer help accomplish your established goals?
- Can the lawyer work within your budget?
The Typical Owner’s Law Literacy
When we asked our lawyers how educated their clients typically were on matters of law, 78 percent said their clients were somewhat educated – which is good news for business owners. Most clients have a particularly good handle on issues of venture capital, financing, employment law, and HR.
Still, owners are far from perfect when it comes to understanding the legalities of starting a business. Topics most likely to trip people up are incorporation, business operations, intellectual property, and general business law.
According to Tiffany A. Donaldson, Esq. “Many small business owners do not realize that by going into business under a business name or using a product name that is already federally registered could lead to a lawsuit for trademark infringement.” This is why it’s important to ask your lawyer if your business or product name infringes on any existing trademarks before moving forward.
Business owners may have a good foundation of knowledge, but there is always an opportunity to learn and understand more. According to our surveyed lawyers, the best way to protect personal wealth from business risks is to understand incorporation. Nearly 93 percent of participants identified this as the No. 1 topic to tackle.
As Tom Shnaider, Esq. explains, “One of the main purposes of forming an entity, such as an LLC or corporation, is to protect current and future assets. Since forming an entity comes with a cost, formation can be delayed a bit; however, the trigger should be when you start doing business with any other person or company. For example, if you are developing a product on your own, you can likely hold off forming a company. However, as soon as you hire a service provider, are ready to enter into any contract, or start selling your product/service, it is time to form the company. It may take up to eight weeks to have a state approve your company, so make sure to plan ahead.”
We also asked respondents how small businesses could get the most value out of their legal team. The most common answer was to communicate clearly and upfront.
“[Small businesses can maximize the value of their legal teams] by having clear communication channels … (responding to emails in a timely manner, etc.) and providing as much information as possible to the legal team’s requests for information … [so that they don’t] run up unnecessary billable time,” Usman Shaikh, Esq. answered.
The Beginning Basics
For those who haven’t yet taken the plunge into business ownership, what are the most important questions to ask before getting started? Interestingly, in this case, our lawyers chose business operations over incorporation. Understanding operations before you dive into a business is the most important thing, according to respondents. This is followed by incorporation, intellectual property, and employment law and HR.
As Serena Lai, Esq. explains, you should ask your lawyer, “What laws apply to me, and how do I make sure my business is compliant? Depending on the type of business structure you’ve selected, the industry you are in, and the method(s) you’ve chosen to buy or sell your product and services, you may be required to comply with various federal, state, and local laws or risk hefty fines or liabilities for noncompliance. It is important to consult your legal team to understand the laws that apply to you.”
Whether you’re starting a small business or already have one underway, it’s important to know what your legal risks and options are. Before you hire a legal team, make sure you’ve got answers to the fundamental questions above. Once you have them at your disposal, be efficient in your communication and address relevant topics like incorporation and intellectual property.
Don’t forget, good legal counsel can be a vital part of your business team – not just for legal advice, but for business insight as well. Check out UpCounsel.com to get connected with the best lawyer for you and your business.
As Jason Brown, Esq., explains, “Astute successful lawyers are inherently part of a successful business and when they help you with your vision to avoid litigation, they may also provide insight about the business plan and what has worked for them or other clients and equally important, what has caused similar plans to fail.”
We surveyed 55 lawyers to get their thoughts on startup law. Based on the content of each answer, they were placed into one of several startup law categories to gain a cumulative look at the responses.
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