Why Do
I Need a Business Lawyer Anyway?
I
am often asked why anyone would need a business lawyer to incorporate,
when all one needs is an incorporation kit from the local office
supply store. Perhaps I
can answer this question by asking a few questions.
Did
you know that a corporation in California pays a minimum of $800 per
year in franchise taxes, whether it has any profit or not?
Did you know that there is a double (corporate and individual)
tax involved with corporations, which cannot be entirely erased, even
with expensive lawyers and accountants?
Did you know that if you do not keep your corporate books and
financial books and
records separate from your own, that the corporation may not exist
when you need it most – to insulate your personal assets from a
large liability?
Did
you also know that there are at least four other limited liability
entities that may be available to you and perhaps even more
appropriate for your business?
Hiring and firing of employees
is fraught with potential and substantial liabilities, but did you
know that simply mischaracterizing employees as salaried versus hourly
may require you to pay huge overtime wages and penalties years from
now? Do your employees
work “at will”, or does your employee manual unravel “at will”
employment?
Do
you have an employee manual that covers sensitive areas, e.g. sexual
harassment, discrimination, and family leave?
Employees
are one of the greatest sources of liabilities for a business.
These liabilities may be limited in advance through instituting
proper policies, procedures and forms.
There is no such thing as a standard employee manual for your
business on the office supply store shelf.
Different employment issues have their own triggering legal
events, such as numbers of employees.
Another
source of significant liability to a firm is its contracting policies.
Does your firm have written uniform contracting procedures and
policies? Do you
have standard contracting forms?
Are they up to date? Do
they protect you in the areas of indemnification, warranties and
guarantees, and trade secrets? How
long has it been since these forms were reviewed in the context of
your present mix of business and the current legal environment?
If you have added government contracting to your mix, this adds
a whole new level of legal risk to your business, including employee
“whistleblowers”.
Environmental liability is
another legal “minefield”. Many
“Moms and Pops” have been put out of their businesses and homes by
purchasing businesses that had
unknown
environmental liabilities arising decades ago.
The purchase of businesses and real estate without proper
protection against environmental liability is akin to playing Russian
Roulette with your assets.
Large
businesses have learned the hard way that they need full-time legal
counsel in their firms to handle these and many other matters, such as
equipment leases, real estate transactions, sales or purchases of
assets, international transactions, and other matters.
There is a rule of thumb that a business needs one full-time
lawyer (172 hours per month) for every 500 employees.
So your business is only 12 employees?
You should need, on average, a business lawyer 4 hours per
month. That assumes that
your business is already “up to snuff” in its legal affairs.
A
legal audit to determine whether your firm is adequately prepared to
meet its present legal situation will “fix” unprotected areas.
Now
you know why you need a business lawyer!
Caveat:
The purpose of this article is to provide information, rather than
advice or opinion. It is accurate to the best of my knowledge as of
the date of the article. I have no duty to update this article. The
information, examples and suggestions presented in this article have
been developed from sources believed to be reliable. This article
should not be viewed as a substitute for the guidance and
recommendations of a retained professional and should not be construed
as legal or other professional advice. In addition, I do not endorse
any actions addressed herein, unless they are produced or created by
me. I recommend consultation with me or other competent legal
counsel and/or other professional advisors before applying this
material to any particular factual situations.
