During a recent oil change, the mechanic suggested that it was time to replace the car’s timing belt. He explained that, although the procedure was expensive, the belt could break at any time, and at that point, the damage would wreak havoc on the car’s engine and my pocketbook. Preventative care was so costly, yet the risk seemed so remote…
Businesses often encounter similar issues in a different context: should scarce resources be used for a lawyer, when legal pitfalls appear unlikely? Likewise, should management heed the attorney’s advice on a particular contract issue, when the company wants badly to land an account with a large customer? The value of a transaction to a company often controls such decisions. While some business owners loathe the idea of legal fees, others integrate legal advisors into their regular decision-making process.
Which is the right course?
A business does not need a lawyer at every instance. Business owners and executives know best how to run their enterprise. Still, however, certain stages of company development warrant legal expertise due to the nature and importance of the underlying event or transaction. On these occasions, obtaining legal counsel is a valuable tool and a prudent investment toward company growth.
The following situations are fairly common in the lifecycle of a startup company and are ripe for advice from experienced legal counsel: legal structure of initial entity (liability, governance, tax, financing, securities law issues); jurisdiction of formation (governance, liability, tax, financing, securities law, contract interpretation issues); shareholder agreements (governance, tax, securities law issues); raising capital/selling securities (governance, liability, tax, financing, securities law issues); compensation/options (tax, securities law issues); intellectual property (registration, protection issues); licensing (intellectual property protection issues); strategic ventures/transactions (legal structure, jurisdiction, securities laws, liability issues); employees (intellectual property, labor and employment laws issues); independent contractor engagements (intellectual property protection, confidentiality, labor and employment laws issues). Of course, a single contract can incorporate several legal issues. An experienced attorney-advisor will walk a client through these events, highlighting what is needed to avoid pitfalls that typically result from poor planning and to implement the client’s business plan with out undue interruption.
Having the advice of experienced legal counsel is like riding with a mechanic in the passenger seat. An advisor can guide a company away from potential hazards, provide tune-up advice along the journey, and repair unexpected issues when they arise with precision. If a breakdown could result in the loss of an owner’s investment, then legal counsel is certainly worth the expense.
