When setting up a business, it’s important to have two key allies on your side – your accountant and your legal professional. With that in mind, we’ve put together our top tips for ensuring that your legal set up fits in with your business model.
1. Make sure that you take legal advice
This might seem like a no-brainer but all too many business owners wait until legal issues crop up before taking advice. Usually this is too late. Time, money and future heartache can all be avoided by engaging with a legal professional before you need them. You don’t want to fall foul or the law simply for not preparing or overlooking a key legal factor in how your business operates – make sure you’re operating legally until you’re legally compliant everywhere you need to be. If there’s a wait then use this additional time to build areas that aren’t impacted by legal issues.
2. Find out what experience your attorney has and how this can benefit your business
It’s obviously extremely important that your attorney understands your business, so it’s important that you understand your attorney. Do they have experience in your industry? Have they worked with entrepreneurs or small businesses before? What are their areas of specialism? Have they been recommended by other entrepreneurs within your industry?
Consider where your business operates – across multiple territories? On a local level? Internationally? Or maybe you have specialist needs like complex technical contracts, patents, real estate or complicated taxation issues – seek advice from a legal expert in that specific area rather than relying on someone who “does it all”.
3. Ensure that you have a budget in place for legal advice
When you start your business, it’s easy to focus on spending as little at the outset and investing in areas that directly benefit your business model and sales – however, your legal advice is somewhere you don’t want to skimp. It’s safe to always ensure that you have a provision in place for your legal needs and that you budget appropriately. Speaking to other entrepreneurs who have a similar sized start up or work in the same industry and are likely to face the same legal challenges or circumstances can also be a good indicator of what you might need to budget for and how much.
There are a range of different solutions that you can discuss with your attorney to keep those legal bills from skyrocketing:
Charging by the hour or per diem –this is pretty common in legal circles. If there’s additional travel involved they might also bill you by the day
Flat fee – An experienced attorney may charge a flat fee for certain routine tasks that they deal with regularly and understand the timescales involved (for example, writing a contract or reviewing and agreement).
Monthly retainer – If you anticipate a lot of routine questions, one option is a monthly fee that entitles you to all the routine legal advice you need. This needs to be considered carefully to establish whether you will actually need your attorney on retainer.
Contingent fee – For complex legal matters (such as a lawsuit), attorney’s usually work on a contingency basis which means that they receive a percentage if they win the case, usually 25-40%. If they don’t, they usually only receive out-of-pocket expenses.
Value billing (also sometimes called “partial contingency”) – Some law firms bill at a higher rate to businesses where they have obtained a favorable result (for example, saving thousands on a contract or finding a clause that saves a business a considerable amount of money). This doesn’t always translate to the best value for your business on an ongoing basis so it’s worth being mindful of this. Although you may have saved money elsewhere, it’s likely you’ll be repaying this on an ongoing basis.
The best advice is to speak to your legal representative early on to determine the best option for your business. Try not to underestimate your legal fees and err on the side of caution where setting a budget is concerned. You, as a customer, are in a favorable position – don’t be scared to negotiate!
4. Keep up to date and accurate records
Ok, we know this is the boring part…and probably isn’t why you became an entrepreneur at all – but good records can save your skin when it comes to legal matters. Legal paperwork will probably be handled and stored by your attorney, but the day to day stuff – the conversations, sales records, agreements, contracts, compliance certificates, licenses etc will need to be kept in-house and in all likelihood, it will be you who is responsible for ensuring that this information is kept up to date.
If this isn’t your personal strength, maybe it’s time to hire someone whose strength it is so that they can ensure that records are up to date and appropriate paperwork is filled in on time.
5. There are some issues you can handle on your own
Although it’s extremely important to have the right legal advice on your side, there are things you can do yourself. A lawyer will be happy to help you, and after all, they’re the experts, but they’ll charge the going rate for doing so. So, before you instruct the work ask yourself (or do some research) to establish “does a lawyer need to handle this?” Remember, if you don’t feel comfortable handling something or you find a variety of conflicting information then it’s best to consult an expert.
A selection of some of the areas you can handle yourself (if you choose), or consult a legal professional on are:
- Writing a business plan
- Researching/choosing a business name
- Applying for standard licenses and permits
- Contracts for use with customers and clients
All in all, if you’re ever in doubt consult your legal professional – but make sure that you find your legal professional early on to help you throughout your time as an entrepreneur. While it may seem like a cost you could do without initially, fantastic legal advice could be worth the weight of your attorney in gold.