What to Ask: Hiring an Attorney and Incorporation | Diana Laskaris, Esq.
UpCounsel attorney Diana Laskaris explains what every startup should be asking their legal team about hiring an attorney and incorporation4 min read
How do you charge?
Some attorneys charge by the hour but increasingly there are ways to work with legal advisors on flat fees, value billing, fixed retainer and project block basis. This is often a great way for small business owners to make sure that they keep a cap on costs and know in advance how much these services will cost so they can budget up front.
What is your approach to working with small businesses?
Some attorneys prefer to be reactive, waiting until they are asked to do work. Others act as advisors and counselors, providing input on various areas of the business that can help small business owners plan how they want to approach dealings in the context of the overall business. It's important that the attorney's approach matches the way that the small business owner prefers to work.
What experience do you have working with small businesses like mine?
While many competent attorneys can handle just about any business matter put before them, it's helpful to know if an attorney is aware of the quirks and personalities that may be unique to your business. Tech businesses go very quickly and attorneys need to keep up with the speed. Entertainment businesses can provide information in drips and drabs with lots of possible scenarios in between so attorneys need to be able to deal with creative personalities. Each industry has its own unique qualities and attorneys who are aware of those often make a good fit for the long term.
What's the most challenging situation you ever dealt with in a client?
This is one way to find out how the attorney solves problems with or for clients. Understanding their role as a service provider, team extension, trusted advisor can be explained when answering such a question. You can also learn how creative an attorney may be in problem-solving and how solution-focused they might be.
How do you see us working together?
This is a way to gauge the enthusiasm for your business, whether this is seen as a short or longer term relationship, whether your needs and goals fit with the vision of the attorney or legal team and what you might expect if you choose to work with the attorney. It's important really to know who you are working with and how seriously they take your account. It's a terrible inconvenience as well as often disruptive and expensive to shift legal counsel. Best to find a good match at the beginning whenever possible.
What is the best way a small business owner can protect personal wealth and assets from business risks?
Depending upon the nature of the business, forming an entity that has a separate life and "personhood" can be a wonderful way to protect personal wealth and assets from business risks. There are different types of legal entities, each with its own characteristics and requirements. This question is an important one to consider early on with a legal advisor or team so that a small business owner chooses the best structure for the business while also protecting personal assets.
What specifically are small business owners most confused about when you first meet with them?
They know what they want to accomplish, but they do not necessarily understand the legal implications of their business decisions. I spend a lot of time educating them and providing counsel so that they understand their options and the interplay between business decisions and legal obligations.
How can quality legal services help a small business grow?
A good attorney or legal team provides you with the ability to spend your time on your business rather than in your business. By that, I mean that competent counsel removes the burden of the small business owner from having to spend time on legal matters rather than on the core business matter that will grow your business. Additionally, as counsel continues their relationship with you, the ability to help you see the big picture about what you do in context can provide paths to growth that may not be open to you otherwise.
How can quality legal services help small businesses save money?
Preventing problems that could occur in the future, avoiding costly legal mistakes or misunderstandings, clarifying duties and obligations, and optimizing negotiations are the hallmark of great legal services that can save small businesses money.
How can small businesses maximize the value of their legal team’s services?
By using your legal team or attorney as a counselor, asking questions and providing lots of two-way communication, small businesses can gain immeasurable value from their legal services. Working with your attorney or legal team as a trusted advisor and extension of your business ensures that everyone is on the same page when dealing with both opportunities and challenges, so you can make the most of any circumstance.
Should business partners have the same amount of equity in a company? Why or why not?
That entirely depends upon the circumstances and the partners. In some situations, one partner will provide funding while the other provides "sweat equity." Sometimes there is one partner who provides an asset or knowledge without which the business would not be viable. The relationships of business partners may be varied, but what is always important is that the expectations as well as the parameters of the equity and other business responsibilities are expressly agreed to and written out in advance. Assumptions can kill friendships and destroy businesses, even among longtime friends who go into business together with the best intentions. These sad circumstances can often be completely avoided by advanced planning done with competent and caring counsel.
What are the top three things a small business owner should be aware of when purchasing an existing business?
Review the business's tax returns to determine profitability and if there is outstanding tax liability, Due diligence reviewing customer lists, sale records, advertising materials, and employee contracts, Find out if there are any human resources issues or outstanding lawsuits pending against the company.
Do you have any other essential legal guidance for startups that you haven't already included in this survey?
Small business is challenging, even when everything is going great. Having reliable, smart, creative legal counsel can provide a strategic advantage at any stage of the business. Focusing on ways to maximize profits while minimizing risk is something that an attorney or legal team can do to ensure that the business has its best chance at growth, success and return on its investment.