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Does a Small Business Lawyer Really Add Value During the Startup Phase?

Deciding whether or not to hire a small business lawyer is an individual choice and dependent on many company-specific factors. Here are some guidelines to help startups decide whether or not a lawyer is needed for initial business organization.

Each startup must create its own path to success and some businesses may require more legal assistance than others. Deciding whether or not to hire a small business lawyer is an individual choice and dependent on many company-specific factors. Here are some guidelines to help startups decide whether or not a lawyer is needed for initial business organization.

6 Reasons to Consider Hiring a Small Business Lawyer

1. Complex Organizational Structure

A standard LLC operating agreement can be found online, along with a wealth of information about the basics of starting a business. However, if a company is unsure about which structure is the best fit for their situation, the assistance of legal counsel may be worthwhile.

2. Time Pressure

When management is under pressure to launch a new product, they may prefer to devote time and resources to non-legal issues. In this case, hiring a lawyer to take care of the initial company organization may be the most efficient solution.

3. Lack of Business or a Legal background

Not every entrepreneur has a business background. Some new business owners invent a really cool product with unexpectedly high demand and are unexpectedly faced with managing a new company. These individuals may feel more comfortable calling on a lawyer to assist in the establishment of a business.

4. Planning to Secure External Investment

If a company intends to seek capital investment, a lawyer can provide assistance in this area. Structuring financial deals can be very complex. Management will need to choose between the pursuit of debt or equity funding based on the relative costs, benefits, and related tax issues. Lawyers with experience in drawing up investment agreements can be invaluable to the process, if only to help clients translate the legal language used to define these business arrangements.

5. Privacy Disclosure Requirements

If a company wishes to collect customer information for future marketing purposes, attention must be paid to privacy and data security. A lawyer can help draw up a privacy statement for a company website or to mail to customers to ensure compliance with industry privacy regulations.

6. Intellectual Property

If the company intends to patent a new product, an intellectual property lawyer can help navigate the process and assist with drafting the necessary paperwork.

4 Reasons Why Companies May Hold off On Hiring a Small Business Lawyer

1. Previous Experience Negotiating Contracts

Previous experience negotiating, reading, or even writing contracts helps business owners gain comfort dealing with legal agreements. Basic contracts can often be found online and can be adapted as needed without consulting a lawyer.

2. Desire to Understand the Legal Details

Some entrepreneurs want to understand every aspect of their business, including legal issues. If they wish to take the time to read up on business organization and legal requirements, a simple business structure can be created using online resources without consulting an attorney. This experience will also provide a foundation for future business ventures.

3. Business is Relatively Straightforward

Sole proprietors or LLCs with low liability risk may also choose to handle the initial business setup without retaining legal counsel.

4. Money Savings

Lawyers are an added expense that many startups just can't afford on day one. Yet when cash begins to roll in and the company turns a profit, it may be a wise idea to circle back and check in with legal counsel. Aside from assisting with document preparation, lawyers can provide sound advice and actually save companies money by suggesting the most efficient structure. A master contract can also be drawn up to serve as the basis for all customer agreements.

Deciding not to engage a lawyer prior to the start of a new business doesn't mean that future legal consultation is impossible. By sitting down with lawyers and checking in from time to time with questions, small business owners will develop a business relationship that may become significant in the future, should any issues arise.


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This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.

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