What to Ask: Incorporation and Hiring an Attorney | Jonathan Marashlian, Esq.
Starting a new business? UpCounsel attorney Jonathan Marashlian explains what every startup should be asking their legal team about incorporation and hiring an attorney4 min read
Does my business require a professional or occupational license from the state government where it will operate?
In the early 1950s less than one in 20 workers were required to have a license to legally perform their jobs. Today, that number is on one in three. Operating without the requisite license can result in fines, penalties and even suspension/cessation of one's business.
Are the services and/or products my business sells subject to state or local sales, use or other transaction taxes?
And am I able to calculate, bill, collect and remit the taxes my business is required to? Failure to bill, collect, and remit sales and other taxes can lead to late penalties, audits, and can reduce the value of your business if you decide to sell, as tax liabilities remain and must be addressed before winding down a business or selling the entity or its assets.
Does my LLC Operating Agreement, Partnership Agreement, Corporate Resolutions provide for a clear and unambiguous process to follow in the event of a dispute among business partners?
Everyone goes into a business relationship expecting the best. They expect their business to be a success and to be running the business for years and years to come. But life has a funny way of throwing curve balls. And when business partners move to sell, dissolve, exit or otherwise affect their interest in a business, the agreement governing the relationship will become critical to what happens next. Clearly spelling out the process and making that process as "independent" as possible – putting responsibilities for decisions in the hands of independent 3rd parties – can ease the pain and discomfort of what might otherwise devolve into contentious, litigious confrontations.
Does my business possess intellectual property (patents, trademarks, etc.) that require protection?
Failure to protect intellectual property before going to market can result in difficulties and additional expenses in the future, when your business seeks to enforce its rights. Protect your rights before you promote.
How do federal and/or state consumer protection laws and regulations impact my business?
And what can I do to ensure compliance? The Federal Trade Commission and state Attorneys General are charged with enforcing many of the consumer protection laws and regulations, at the federal and state levels, respectively. Be sure your business practices do not infringe upon consumer rights, particularly in high bar and high enforcement jurisdictions, such as California. The best defense against a consumer class action or government enforcement action is making sure your marketing policies and practices are lawful.
What is the best way a small business owner can protect personal wealth and assets from business risks?
Form an LLC or S corp. and avoid using the corporate entity as your alter ego while engaging in unlawful or fraudulent activities.
What specifically are small business owners most confused about when you first meet with them?
There are so many diverse laws and regulations that might apply and so much misinformation available on the Internet, it is not unusual to encounter new business owners who "think" they know what rules apply, but really do not. It's similar to the person who feels an ache and visits WebMD to perform a self-diagnosis. You shouldn't be your own doctor, and likewise, you shouldn't try to be your own lawyer!
How can quality legal services help a small business grow?
Everyone can learn from someone with experience. While lawyers may not have, experience running a business themselves, many of us have run our own firms and many more of us have years of experience helping other businesses get themselves off the ground and growing. Finding a lawyer who is a partner in your business and not merely someone you reach out to AFTER problems arise is the best way to minimize the bumps in the road.
How can quality legal services help small businesses save money?
How can small businesses maximize the value of their legal team’s services?
Ask for a quote before authorizing the work. If the value you perceive of the requested advice or services does not match up to the cost, then you can avoid the expense, revisit your needs, and redefine the scope of services desired so it more closely aligns with the value derived.
Should business partners have the same amount of equity in a company? Why or why not?
Yes and no. It all depends on the unique circumstances, personalities and expectations. No two businesses or business relationships are created equal. Each relationship should be evaluated on its unique merits and a structure agreed upon in advance that meets with the expectations of all parties.
What are the top three things a small business owner should be aware of when purchasing an existing business?
Accurately determine the value, 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