What to Ask: Incorporation and Hiring an Attorney | Brian Selchick, Esq.
Starting a new business? UpCounsel attorney Brian Selchick explains what every startup should be asking their legal team about incorporation and hiring an attorney4 min read
Do you see "eye to eye" with the attorney you are interviewing?
If there is no click, no clearly established rapport – think about whether this is someone you want on your team.
Is the attorney ready and willing to be a part of your team? Are they solely a lawyer with a focus on the details of the agreements or documents you may need drafted or do they bring more to the table?
Point: Look for an attorney who can act as your counsel and as a sounding board. What kind of ventures have they been involved in or are they all about the billable hour? What drives and motivates the attorney you are chatting with?
Are they professional yet fun to work with?
Let's face it, in a small business you have to get along and enjoy chatting! If not, it becomes business as usual, which, you can hire any lawyer to do paperwork. Question is – would you hang out with your lawyer or are they a dry, old soul ...?
Can they meet your requirements, deadlines, and, your budget?
Be reasonable here re: budget of course, but, can they get the job done?
What is the best way a small business owner can protect personal wealth and assets from business risks?
Two-part answer that leads to many other methods and ways: 1. proper formation / incorporation of an entity; and 2. insurance, insurance, and, insurance. Too many businesses get in way too deep before they even consider the need for directors' and officers' liability insurance. In for a penny, in for a pound - watch your six!
What is the best way a small business can maximize its tax deductions?
I am not tax attorney so I will answer with the following – get a killer CPA who does not cost an arm and a leg. Ask your lawyer for a referral. Great lawyers only refer clients to great service providers.
What specifically are small business owners most confused about when you first meet with them?
Why things (agreements) need to be so "complicated" as opposed to simple and straightforward.
How can quality legal services help a small business grow?
By delivering what is needed on a timely basis for a reasonable fee while doing what he / she can, within the bounds of the law and ethically, to help the client grow his / her business by providing sound business advice and strategies known to said attorney (only comes with experience). Connections do not hurt either. *Remember: attorneys do not raise capital for a living … if an attorney says they can / will do so, be weary of the laws, rules and regulations relating to the same.
How can quality legal services help small businesses save money?
One and done – they get it right the first time. Add that to alternative fee arrangements such as flat fees, mixed fees, and phased fees.
How can small businesses maximize the value of their legal team’s services?
Got a question or an issue? ASK! You would be surprised if not shocked how helpful your attorney and/or your lawyer's circle of connections can be, if you simply ask.
Should business partners have the same amount of equity in a company? Why or why not?
It is all about what each partner brings to the table, money (skin in the game), a skill (CTO for example), connections, a skill (some people can just sell), etc. Should they all have an equal equity stance? Unlikely even if the contribution is equal. Why? You just may create the proverbial "nuclear submarine." Someone has to be appointed to execute and get "stuff" done. If you give out equal shares in newco / membership units, make sure that someone can pull the trigger on the day to day items.
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, Find out if there are any patents, copyrights, or trademarks associated with the business, Determine why the business is for sale., How long have the employees been there? Are there any key employees who would be hard to replace?, Find out if there are any human resources issues or outstanding lawsuits pending against the company., Really, all of the items are a "yes" when you are considering purchasing any existing business. Consulting an attorney who understands the industry you are in, can send you a due diligence checklist, and is willing to spot the issues that require review is what you need; the answers above are fact dependent.
Do you have any other essential legal guidance for startups that you haven't already included in this survey?
If you are looking to raise capital, do some background research on the core items contained in a term sheet. Attorneys are not investment bankers; you will need to decide the proper price for your security (debt, convertibles, equity, SAFE, revenue share, etc.). If you are unsure, consider hiring a business / financial advisory to assist you with this. There are a ton of such services available on demand for a reasonable price.