What to Ask: Incorporation and Business Operations | Chris W. Hogue, Esq.
Starting a new business? UpCounsel attorney Chris W. Hogue explains what every startup should be asking their legal team about incorporation and business operations 3 min read
What is your philosophy regarding an in-house legal team's role in terms of its interaction with its internal business clients?
This is an important question because it can really define the mindset of your legal counsel. Specifically, you should be looking for your legal counsel to view the relationship as that of a partnership – instead of an impediment to business. Being mindful to avoid the tendency to default to "No" following a business request, but instead asking the question "Although we cannot move forward with the current plan – how can we make this work?" Over time, your internal business clients will view you more as a resource as opposed to a hindrance to business progress.
What is the best way a small business owner can protect personal wealth and assets from business risks?
At the outset properly formed and maintained business entity is the most efficient and cost effective way to shield personal wealth and assets from business risk. No one type of entity is the right fit everyone. Whether you choose a corporation, limited liability company, limited partnership or any other entity structure, the decision should be made based on your specific circumstances and in consultation with legal counsel well versed in business and commercial law.
What specifically are small business owners most confused about when you first meet with them?
In general, small business owners seem to struggle with how their business model translates to day to day commercial transactions. Whether it be identifying the variety of form contracts that will be required to engage in business, or how their specific product or service can best be positioned in terms of legal documentation – this is an area that business owners are inherently unaware of. After all, they are business people, and that’s what makes them great at what they do. That said, they should partner with an efficient business lawyer that is equally great at what he or she does. The match of the two specialties is a recipe for success over time.
How can quality legal services help a small business grow?
Quality legal services can assist a business in its growth in many areas. With the proper foundation, including entity structure, base level template contracts, as well as forward looking legal structure for the various business channels – a business can stay focused on what it does best – "business," while avoiding the preventable stumbles that can arise from lack of legal structure and documented obligations.
How can quality legal services help small businesses save money?
A well-crafted foundation of legal documents and guidance from knowledgeable legal counsel will pay for itself many times over in terms of risk avoidance. Risk avoidance is, by definition, unable to be quantified; but by witnessing the destructive effects of a business stumbling from the outset due to lack of legal guidance – the risk avoidance factor is very apparent.
How can small businesses maximize the value of their legal team’s services?
Involve your legal team as early and as often as possible in business dealings. Instead of viewing legal as a box to check at the end of the business process, view it as a partner that will provide value along the way, helping to steer the direction of the business. This will pay dividends over time and very likely avoid the issue of last minute deal hiccups that could have been avoided with legal input earlier in the process.
Should business partners have the same amount of equity in a company? Why or why not?
There is no one size fits all answer on this question. Business partners are of various backgrounds, skill-sets and experience levels. Inherently one piece of a business may be valued more than the other and therefore, the initial equity allocations may need to reflect that.
What are the top three things a small business owner should be aware of when purchasing an existing business?
Accurately determine the value, Find out if there are any patents, copyrights, or trademarks associated with the business, Require the current owner to sign a “Not to Compete” contract