Over the past month, I have dealt with several new clients that have unnecessarily cost themselves time, headaches and money because they tried to avoid spending money on attorneys at the early stages of their companies. These folks all turned out to be penny wise, but pound foolish.
When Should A New Business Owner Hire an Attorney?
Once it is clear that there is a real business in place, it is essential for a new business owner to seek legal counsel. A qualified corporate attorney can review a company’s foundational documents to make sure they reflect the intentions of the business owner(s). This is even more so the case for a business with more than one owner. Equally as important as hiring an attorney is hiring one qualified to handle commercial matters. Hiring a non-corporate attorney to organize a company is almost as bad as not hiring one in the first place.
What are the Potential Consequences of not Hiring an Attorney?
I am currently working with a client who brought on a partner for her company that had been in operation for several years. She had her well meaning attorney cousin draft the agreements which gave her new partner half of the company on day one. Now that the relationship has soured after a period of eight months, my client is seeking a way to regain control over her company. Given they are now equal partners and the attorney that drafted the documents did not provide an out for my client, it is costing not only valuable time and providing a grand headache, but it is also costing a multiple of more than 4x in legal costs by cutting corners.
This is just one example of what can go wrong. The best bet for a CEO is to consult with an attorney (preferably at no cost) to find out if their situation calls for professional legal advice.