By: Rudman Winchell Attorney Jonathan Bench
Maine abounds with entrepreneurs, many of whom started their business with little more than their wits, some money and a belief in themselves. As a former entrepreneur of a small services business, I started with a squeegee, a tool belt, and a handful of flyers that I distributed door-to-door. I did not know any business lawyers. I did not know whether my business would be successful enough to support my family. I did not know if my business would expand in terms of revenue or employees. And I certainly did not know with any certainty what kind of liabilities I might be facing as a business owner or how to protect myself.
So I did the only logical things. I muddled my way through the Secretary of State’s website, trying to determine whether I should register as a corporation, an LLC, or if I even needed to register my business at all. Then I debated with myself about whether I could afford business insurance. Finally, I talked to one of the only two lawyers I knew, neither of whom were business lawyers. He suggested I register my company as an LLC, because, “You never know who is going to sue you.” I knew that personally I was not worth much financially, but I wanted to protect the little that I had. I did not know that I would still not be protected from my own negligence. The tax ramifications of setting up my business as an LLC also never entered my mind. Looking back, if I had had a business lawyer as a resource, I would have asked, “When do I need to consult a business lawyer?”
There are some relatively straightforward things a small business owner can do for herself, if she is detail-oriented and willing to learn a few skills that may not currently be one of her core competencies. The actual formation of the business, applying for an employer identification number (EIN), business licenses and permits, and establishing a bank account are a few of the simpler tasks. Even the terms of basic employment or purchasing contracts can be settled on before seeking out a business lawyer. Entrepreneurs are comfortable wading out into new territory and should not shy away from these relatively straightforward processes, if they are so inclined. You may even be like a friend of mine who has been running her business for 18 years without having consulted a business lawyer (until now). However, proceeding with a business start-up without the advice of a business lawyer may mean that you are making decisions in an environment where you unaware of what you do not know, which have long term adverse consequences.
If you are less of a hands-on person when it comes to legal matters, a competent business lawyer can help you at the outset to structure your business, determine what corporate form makes the best sense in terms of ownership, financial resources, tax liabilities, and overall ease of jumping through legal hoops in the future. You cannot discount the importance of surrounding yourself with a highly qualified and well-seasoned team of advisors, such as a business lawyer, CPA, and an insurance advisor, who are properly called “professionals” because they know their specialty better than anyone else.
If your business is operational and you have reached the point where you must take a big step, you may be looking for a good business lawyer to advise you. Entering into a significant contractual relationship, borrowing money from an institutional lender, making a large asset purchase, taking on new investors, either through debt or equity, ownership struggles for the company, trouble with management or employees, or handing the business down to the next generation can all loom as daunting and risky matters. If you have very little documentation to work from, you may not know where to start. Whether you want to save time or money, an experienced business lawyer can help you do both and reduce your chances for large missteps in the future. With peace of mind you can then focus on what you really love to do – grow your business.