Why Every Entrepreneur Needs a Lawyer

For any business owner, it's never good to be inside a courtroom. If you attempt to handle complicated legal matters without a law degree, it can get really ugly. While legal advice can get pricey, it can be worth the expense down the road. Here are five reasons to have a lawyer in your corner:

Establishing an Identity

There are pros and cons to forming a corporation, a limited liability company and other legal partnerships. An attorney who specializes in small businesses can walk you through the legal and, in many cases, the tax implications of each entity so that you make the right decision. Especially when states vary on how they tax corporations and LLCs. The price tag for the advice: $1,000 to $5,000, depending on how complicated the structure is. And when it comes to picking a business name nowadays, Suzanne Saxman, a partner at Chicago's Seyfarth Shaw LLP, recommends choosing a URL address first.

Protect Your Name

Whether you choose to incorporate or register as an LLC, you need to protect the name of your business. An attorney can help with trademark protection and drafting contracts or agreements, says Barbara Schatz, clinical professor of law at Columbia Law School. For example, do you need a nondisclosure agreement to protect some of the company's secrets? More importantly, an attorney can also help you build that wall between your company's finances and your personal assets.

Planning an Exit Strategy

It's never too early to plan for the future, says Saxman, who is also vice chair of the Middle Market and Small Business Committee of the American Bar Association Section of Business Law. You have to think about what happens to the business if you, a partner or an investor decides to retire, wants to cash out or, worse, sells the interest in the business to an outsider.

Fine Tuning

No matter how much planning you do, unexpected things can happen. You have a chance to expand by buying a smaller competitor. To attract better employees, you want to change the benefits package. While most small businesses can't afford to keep a lawyer on retainer, a conversation once or twice a year with your attorney will not only keep him in the loop so he can file things like annual reports, it can forestall any legal headaches that can crop up, recommends Saxman. Budget for about $500 a year.

Talk Can Be Cheap

If the prospect of a legal bill blows your budget, hit up your local law school to see if it has a law clinic that offers free advice to small businesses. Columbia Law School's Nonprofit Organizations/Small Business Clinic provides such services to small businesses that open in disadvantaged areas of New York City. Contact small business associations that may have relationships with law firms that do some pro bono work.

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