For many small business owners, using a lawyer is akin to calling a fireman or plumber: one does it only when there's a problem. That approach is foolhardy when it comes to legal matters.
Especially for new businesses, needs such as marketing, sales, staffing and just getting the business off the ground can easily take priority over legal issues, particularly ones that don't seem to be of immediate concern. However, smart business planning also includes preventing problems and making sure the business is protected against potential trouble by working with an attorney early in the process.
While most corporations will use an attorney to help with the process of incorporation, new businesses sometimes neglect the on-going legal requirements to maintain their corporation status. Annual shareholder, director, and partner meetings need to be held, and recording of minutes and the election of officers must conform with state requirements. Failure to do so could jeopardize corporate status and result in "piercing of the corporate veil" in the event of a lawsuit or other legal action, exposing corporate officers to personal liability or other legal problems.
Many intangible assets of a business should be legally protected. A company's name, logo, brand name, and distinctive goods and services are entitled to copyright protection. Proprietary computer software, semiconductor chip mask designs, vessel hull designs, and many other creations may be eligible for trademark registration. Patents are often thought to cover only machines and other manufactured products, but can also protect processes, such as a method for refining petroleum, or new compositions of matter, such as chemical compounds or mixtures. Trademark, copyright, and patent registrations can help a business protect the things that give it a competitive advantage in the marketplace.
Many companies, especially technology companies, count the knowledge of their employees as some of their most important assets. Yet they fail to protect those assets through non-disclosure and non-compete agreements with their employees. Inevitably, some employees will leave the company, and it's important to protect your business against their taking their knowledge of trade secrets with them over to the competition.
Entrepreneurs sometimes are so focused on starting a new business that they don't consider what happens if one of the principals leaves the business. When a partner or major shareholder decides to suddenly exit, it can potentially threaten the ability of the business to continue operating. Closely held corporations need to have buy-sell agreements or buy-back agreements to ensure that partners or major shareholders can sell their interest without legal entanglements or placing an undue financial burden on the company.
What about the cost of dealing with all these issues? Good lawyers are not cheap, but then again neither is any other consultant critical to your business. A brief consultation with a lawyer can often determine what a business' legal needs are. An investment of a lawyer's time, like a fire code inspection or medical checkup, can help prevent major problems down the road.
Find the Right Business Attorney Near You
As you have just learned, business ventures involve quite a few legal maneuvers and know-how. While entrepreneurs must wear several hats in order to achieve some level of success, sometimes it's best to leave the more complicated matters to the experts. Visit FindLaw's Business and Commercial Lawyer Directory for a qualified attorney near you or learn more about state-specific laws on our closely held business legal answers page.