Welcome to our weekly Buyers Guide series where we share everything you need to know about specific business purchases, including the questions to expect and the questions to ask. Here’s how to choose a business lawyer for your business.
Finding the right lawyer for your business is extremely daunting – it’s an important decision and you want to make sure they take care of all your legal requirements and set you up correctly from the get-go. Further, as you grow, various legal implications will require expert counsel – you’ll want to call on someone who knows your business and whom you’ve trusted since day 1.
WHY YOU NEED A BUSINESS LAWYER
Business leaders might think they know their industry inside and out but the reality is that there are many laws, loopholes, liabilities, risks and rights that will require expert guidance from hired legal support. To start, lawyers will help you setup your business – incorporation documents, founders agreements, etc. Along the way, lawyers ensure you correctly handle legal issues of all sizes – so you don’t break any laws, pay the correct taxes, control risk amongst employees, clients, investors, and more.
WHY YOU NEED A BUSINESS LAWYER NOW
Not having the right legal processes in place can come back to haunt you and severely damage the long-term success of your business. It’s hard, and in some instances impossible, to go back in time and correct legal mistakes made because you didn’t lean on the expertise of a business lawyer. From the get-go, a lawyer will ensure you’re incorporating and forming your business correctly.
Once you start raising capital, they can successfully navigate your funding round. From there, you’re likely ready to begin hiring and granting equity – they can make sure you’re doing this correctly and lowering risk. Business lawyers can also help you negotiate contracts with employees and clients and obtain patents. The upfront costs associated with correctly handling business legal issues is invaluable to the longevity of your business and can save you significant time and money in the long run.
IMPORTANT LEGAL CONSIDERATIONS
All businesses require some form of legal assistance to get started and to continue growing. So the question becomes, how do you know which business lawyer or legal firm to choose to work with? We can help you determine your legal needs and the best legal match for your business according to your specific needs, budget, growth strategy, etc.
Here are top considerations throughout the legal purchasing decision process:
QUESTIONS TO ASK THE LAWYER:
- Do you have relevant experience?
- Do you frequently deal with outside parties that we will need to deal with, i.e. venture capitalists, business banks, accountants, etc.?
- What size business do you typically service?
- Are you familiar with our specific industry and regulations?
- How responsive are you?
- What are your contract terms & conditions of service?
- What services and reporting are covered under this agreement?
- What are your hourly fees and which services have separate charges?
- Do you charge for basic advice?
- Are you equipped to help me with various legal business services, such as IP law, employment law, tax law, etc.?
- Can you provide an estimate on annual costs based on our business model and the services we’ll need?
QUESTIONS THE LAWYER WILL ASK YOU
- What is your personal background and any background from the business?
- Do you have a business plan?
- Who are your investors, directors & officers?
- What vendors or contractors do you work with?
- Can you share any tax forms, corporate records or financial statements to get a sense of the health of the business?
- Can you share any early documentation that highlights the organizational structure of the business, etc.?
- The details of the purpose of your meeting – whether it’s for business formation, or a specific issue like labor, tax, etc. – be organized and concise to avoid extra fees based on the time you spend with them.
Again, this depends on the firm and the partner. A junior partner at a small firm could charge as little as a few hundred dollars an hour but a senior partner at a large firm in a large metro could charge $1,000/hour. You’ll want to have a solid understanding of the hourly rate for all partners on your account and how much each will be working with you. While the higher hourly rate can be intimidating, consider the costs associated with cleaning up the mess of a lawyer who is not familiar with your industry or investor. Choose the lawyer that is most familiar with your business and most successful in your industry.
As mentioned above, this varies and depends on your legal requirements. Many firms offer fixed fee packages which you can agree upon in the beginning. For instance, if you need help with incorporation and a seed round of fundraising, expect to pay around $5,000- $6,000.
Are they available to you when you need them? Do they charge a large amount for small advice? When speaking with references, inquire about their level of satisfaction with ad-hoc legal support.
Ask for the ability to speak with businesses in similar industries, of similar size, and with similar legal needs. If possible, try to identify a client that they don’t list as a reference to perhaps learn some of the downfalls with the firm.
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