Starting a Business

HOW GOOD ATTORNEYS SAVE BUSINESSES

A LOT OF MONEY

This article again discusses in more detail a subject I have written about on troubleshooter.com twice before (or see my site, www.qualitylegaladvice.com). After nearly thirty years of practice, I have concluded that the costliest mistake a new business can make is not having an attorney to prepare and review the corporation or LLC’s documents and an accountant to manage its books of account and tax returns. Here are the costliest problems that develop if an attorney is not used from the very start, listed from the most common to the least common. These are the problems I see over and over, wishing I could have helped prevent them from the start:

1.Inadequate legal advice Scenario 1 - Success is fleeting. Your business is prospering, but you have partners. Proper documentation of all of your interests has never been drafted and signed, so now that one or more of you wants out, there are hard feelings about who is entitled to what. Instead of being able to divide the business amicably, the business folds and the partners forego a great deal of money that could have been made had there been legal advice from the beginning.

2. Inadequate legal advice Scenario 2 - The most valuable businesses have professional documentation.Your business prospers, but when it is time to sell it, you don't have the correct documentation and the price the business commands reflects your ongoing lack of commitment to orderly records and proper compliance with the law. If you had retained an attorney from the start, your documents would have reflected your financial commitment and the business would have sold quicker for a higher price.

3.Inadequate legal advice Scenario 3 - Your brand can make you money or your name may cost you money. Your business succeeds, but someone claims the name you're using for your corporation is a name that is theirs or similar to theirs. This costs you a great deal of money because you have to either retain an attorney to fight the matter or change all of your advertising, letterhead, forms, displays and other materials to get the other business (or its attorney) off your back. If you do it right from the beginning, you can "brand"; your business and have your brand name gain as much value as your business does. Let me help you name your business. Doing this right also means getting a higher price for your business when it is sold.

4. Inadequate legal advice Scenario 4 - The well documented business commands higher fees. Your business succeeds, but when it competes for private or government contracts, its documentation reflects an ongoing lack of commitment to orderly records and compliance with the law. If you had retained an attorney from the start, your business could have been awarded more or better contracts.

5. Inadequate legal advice Scenario 5 - The well vdocumented business protects its owners and tax advantages. Your business prospers, but it is not properly documented and it gets sued or gets audited by the IRS. The claim is made by the litigant or the IRS that because the business is not correctly documented, you have not been doing business in a manner which allows you to use your business as a “shield” or to take full advantage of corporate tax laws. Therefore, you as the business owner are held individually liable for what should have been strictly a business debt, or your business loses the tax advantages it should have had.

6. Inadequate legal advice Scenario 6 - The well advised business shields its owners from liability. Your business falters, but it is not properly documented and therefore does not shield your individual assets from liability. Instead of being able to exit your business with relative ease, you are force into bankruptcy.

7. Inadequate legal advice Scenario 7 - The well advised business avoids costly errors. Your business succeeds, but you sign a contract or lease that was not reviewed by an attorney and a problem arises with the deal or the premises. Because you did not have legal advice, you are individually liable for what should have been strictly a business debt, and you (and your spouse) are forced into bankruptcy.

8. Inadequate legal advice Scenario 8 - The well advised business may fail, but there will be no catastrophic consequences to its owners. Your business falters, but it is not properly documented and therefore does not shield your individual assets from liability. Instead of being able to exit your business with relative ease, you (and your spouse) are forced into bankruptcy.

The wisest businesspeople seek legal advice before they start the business. Properly documented entities that use a lawyer for documentation and a CPA for bookkeeping and tax guidance are worth more. People who buy businesses are impressed by businesses which have owners who have been conscientious and financially committed from the start. Also, if the entity seeks to do business in another state, needs financing, or wants to enter into government or corporate contracts, and its documents must be produced, everything is and always has been in order. This is invaluable for a business and for the owner's peace of mind.

NOT INTENDED AS LEGAL ADVICE - CONSULT WITH A QUALIFIED ATTORNEY BEFORE RELYING ON THIS INFORMATION