Written By: Brandy Miller | February 1, 2017 | No Comments
Prevention is so much less expensive than repairing. That statement can be applied to many things, but it is particularly true in the legal world. Starting a business and waiting to address issues until after they occur will multiply your costs as compared to being prepared ahead of time. Therefore preparing with several legal policies and practices is a very savvy business move as you begin your business for preventing potentially catastrophic effects once your business becomes successful.
Perhaps the biggest concern of any business regardless of size is to reduce costs as much as possible. Executives get degrees in methods to reduce costs for businesses. For any business owner, the idea of getting legal help to prevent problems that don’t even exist seems like an unnecessary expense. But hold on. That decision may cost the business its success down the road. The amount of business owners that look back and wish they could have protected themselves is large.
So what are some things a business owner should think about? The first question is whether to incorporate, and if so, what entity is appropriate. Most businesses should be conducted from a corporation or an LLC. Along with that is how protected the owner is from liabilities stemming from business activities. Insurance is extremely important, and in many instances, it’s required. Remember if it’s worth doing, make sure it’s done right. A flaw in the insurance or the formation of the business entity can prove fatal when a business needs that protection the most. Consult a professional that can be held accountable if it’s not done right.
Most businesses need contracts to make deals. Drafting a contract from scratch every time can be expensive. There is no need that each agreement be an originally drafted contract. Saving costs can mean having a contract template drafted which is tailored by the business owner to fit each particular deal. When it comes to signing contracts drafted by another company’s lawyer, always have your own attorney review it.
Again, having a contract reviewed costs additional money that many business owners would rather not add on to the cost of any deal. However, if a lawsuit or dispute arises, that contract could favor the other company in every way. That leaves you with the unenviable task of paying a lawyer substantially more to try to fix the problem once the dispute arises. Fixing a problem after the dispute arises usually means lengthy negotiation and litigation. Neither is cheap. A properly reviewed contract with fairly negotiated terms for both businesses assures that the other company will not have all of the options on their side, and likely avoids the need for expensive litigation and dispute resolution.
Similarly, a business where multiple owners are involved is friendly and most often the owners are friends. The entire reason multiple owners decide to go into business with each other is that they feel they can trust each other. However, things can and will happen. Business lawyers exist because things often go wrong. It is not uncommon to see issues that divide fellow business owners to their core, and resolving that dispute can lead to litigation. With that in mind, it’s easy to see that it is far less expensive and time consuming to start with an agreement than to deal with the issues after the dispute has erupted. Business lawyers are trained to know how various disputes tend to begin. Consulting an attorney to create procedures to resolve disputes quickly before tempers flare will likely mean the business, and the friendships, survive.
Think of document creation as a path of prevention just like buying insurance. It’s like buying peace of mind. You know the bad things are taken care of, and now you can go through life comforted with your plan in place.
Finally, estate planning is essential for the exact same reasons. Take the time to consider how the business will continue after your death, and who will benefit from your lifetime of hard work.
When a crisis comes, having a resolution in place allows those that are presented with the crisis to deal with the situation with confidence and guidance, not arguments and litigation. It’s the best gift you can give someone, and your business.