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When to Hire a Business Lawyer

There are two professionals every business will need early on: an accountant and a lawyer. The reasons for hiring an accountant are pretty obvious--you need someone to help you set up your "chart of accounts," review your numbers periodically, and prepare all of your necessary federal, state and local tax returns. The reason for hiring a business attorney may not, however, be so apparent. A good business attorney will provide vital assistance in almost every aspect of your business, from basic zoning compliance and copyright and trademark advice to formal business incorporation and lawsuits and liability. First, some general rules about dealing with lawyers:

If you are being sued, it's too late. Most small businesses put off hiring a lawyer until the sheriff is standing at the door serving them with a summons. Bad mistake. The time to hook up with a good business lawyer is before you are sued. Once you have been served with a summons and complaint, it's too late--the problem has already occurred, and it's just a question of how much you will have to pay (in court costs, attorneys' fees, settlements and other expenses) to get the problem resolved. America's judicial system is a lot like a Roach Motel--it's easy to get into court, but very difficult to get out once you've been "trapped." Most lawyers agree that while nobody likes to pay attorneys' fees for anything (heck, let's let our hair down--nobody likes paying or dealing with lawyers, period), but the fee a lawyer will charge to keep you out of trouble is only a small fraction of the fee a lawyer will charge to get you out of trouble once it's happened.

Big firm or small firm? Generally speaking, the larger the law firm, the greater the overhead, therefore the higher the hourly rates you will be expected to pay. Still, larger firms have a number of advantages over smaller ones. Over the past 20 years, lawyers have become incredibly specialized. If you use a solo practitioner or small firm as your lawyer(s), it's likely that they will not have all the skills you may need to grow your business. I don't know of any solo practitioner, and very few small firms (under 10 lawyers) that could handle your lawsuits, negotiate your lease of office or retail space, file a patent or trademark, draft a software license agreement, advise you on terminating a disruptive employee, and oversee your corporate annual meeting. Sooner or later, these "generalists" will have to refer you out to specialists, and you will find yourself dealing with two or three (or even more) attorneys. While larger firms are more expensive to deal with, they have two significant advantages: 1) they usually have all the legal skills you need "under one roof," and 2) they have a lot of clout in the local, regional and (perhaps) national legal community. A nasty letter from a "powerhouse" law firm with offices in 30 states is a lot more intimidating than a nasty letter from a solo practitioner who is not admitted to practice in the defendant's state. Also, being connected with a large, well-established law firm may have intangible benefits--they may be willing to introduce you to financing sources or use their name as a reference when seeking partnership arrangements. Certainly if you run a fast-growing entrepreneurial company that plans to go public (or sell out to a big company) some day, you would need to work with lawyers whose names are recognized in the investment banking and venture capital communities.

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