Running a business is a balancing act. It’s not just providing a useful product or service. It’s also generating revenue, tracking cash flow, minimizing expenses, navigating regulations, responding to complaints, closing deals, and more. Sometimes these activities require legal help, other times not. But how can you tell when you need a lawyer and when you can safely do it yourself?
Sadly, there’s no one-size-fits-all answer to that question. After all, each business is unique. And those differences matter. But below are some guidelines and a list of hints so that you can make an educated decision about when the cost of a lawyer is a good value and, just as importantly, when it’s not.
To start, you should keep in mind the following rules of thumb. First, an ounce of prevention is worth a pound of cure. In other words, doing something right at the beginning is usually far cheaper (and less painful) than fixing a mistake later on. Second, the more money at stake, the higher the odds that you’ll want a lawyer involved. So, while it doesn’t make sense to hire a lawyer to handle a $10 problem, you would be just as silly to avoid the expense of a lawyer when you’re facing a $1 million issue.
With those guidelines in mind, let’s discuss eight common situations where you will want to seriously consider getting legal help.
First, if you are about to sign a new contract, hold off until you’ve had your lawyer review it. Maybe you want to start a franchise (like Starbucks or Burger King). Maybe you need a loan from a bank, the Commonwealth Development Authority, or the Small Business Administration. Or perhaps you are leasing land or property. Whatever it is, if the other side wrote the documents, the language probably doesn’t favor you. So, you’ll want your lawyer to check for unfair terms and unhappy surprises.
Second, if a deal is important, you may want to get your lawyer involved in the negotiations early on. For example, if you are buying or selling a business, negotiating loan terms, or bargaining over a land or equipment lease, your lawyer will be familiar with the process, sticking points, and what’s normal. As a result, they can be especially useful in guiding you through the transaction.
Third, if your business will use the same contracts again and again, you may want to have your lawyer draft or, at least, review the form contracts to make sure they hit the right beats. Often you will focus on a few key commercial terms but a good contract normally needs to cover more terrain than a layperson expects.
Fourth, if a lawsuit is threatened or filed, get your lawyer involved immediately. Don’t delay because deadlines kick in as soon as the suit is filed. Once your lawyer’s up to speed, they can help you figure out the right course of action. Sometimes that’s negotiation. Other times it’s fighting. Many times, it’s a bit of both. Regardless, it’s generally not a good idea to navigate a lawsuit on your own because of the procedural and substantive complexities baked into the litigation journey.
Fifth, if you need to deal with the government about items outside the run-of-the-mill, you may want to get a lawyer involved. For example, if you get whacked with a fine or want to challenge an agency’s interpretation of a statute or regulation.
Sixth, if you want to bring new investors into your business, speak with a lawyer familiar with securities law. There’s a raft of laws that apply to seeking and signing up new investors. If you don’t pay attention to those often-complicated rules, you’re asking for trouble.
Seventh, if your business is struggling, you may want to speak with an attorney about bankruptcy. In many instances, they may find a way to give you some breathing space (usually by leveraging the bankruptcy process, or the threat of it, to cut better deals with your creditors).
Eighth, if you’ve begun to think about how you’ll exit the business, definitely talk with lawyers familiar with tax, business, and estate planning. They can help you address the gamut of issues such as what happens if you die, become disabled, or just want to retire.
What’s the takeaway from the list? Talking with a lawyer is not just about solving problems. Many times, it’s about maximizing opportunities like buying a business, getting a loan to expand, or adding new investors.
So, don’t just think about talking to your lawyer when you want to put out a fire. Consider giving them a quick call when anything major is on the horizon, both good or bad.
A call may seem expensive. But a competent attorney will help you sidestep a raft of problems. And that will ultimately save you way more than going it alone until problems have exploded into crises.
This column is for informational purposes only and is not intended to be taken as legal advice. For your specific case, consult a lawyer.