Hiring a lawyer is not always a necessity. However, at some point in your journey of being a small business owner, it is likely that you’ll need to seek legal advice.
We spoke to Jason Harris of Roxwal Lawyers LLP and Dana Gordon of Benchmark Law Corporation to understand more about why and when to hire a lawyer, the common myths and mistakes that small businesses make, legally, and their advice when starting your business.
Starting a Business is Hard Work
“People underestimate the amount of work and money it takes to start a business and make it successful,” says Jason. “There’s a lot of sweat equity that must be invested in the beginning. And remember, everyone else will need to be paid before you.”
It’s that lack of time and volume of work that often causes small business owners to feel overwhelmed and look for help from a lawyer. There are, of course, many online tutorials and resources that can be used to understand the fundamentals of creating and growing your business, but understanding that information and applying it in the ‘real world’ can be more difficult than you think.
Dana says in her experience, people fall in to two camps:
1. Entrepreneurs that think the startup phase will be easy, just decide and do it.
2. Entrepreneurs that think starting a business is way too hard, so why start.
The truth, she says, is that many businesses fall somewhere in the middle. “It takes a lot of work, and you should do your homework, but it’s never too hard if you’re passionate about what you do.”
When to Ask for Legal Help
So what areas can lawyers provide advice on when you’re first starting your business?
- Business Structure. Your business structure can affect many things, from tax incentives to how you are paid. From your relationship with your best friends and business partner, to your personal liability.
- Intellectual Property. That great new idea that you’ve thought of and have been telling all your friends about: Is it really a new idea? And, how you will protect yourself from someone copying your idea?
- Client and Supplier Contracts. There are some great templates out there, but if you do not take the time to understand the legal ramifications of using them, you can get yourself in trouble.
- Hiring Employees. From insurance, to employment standards, hiring your first employee is a lot more than finding the “right fit”.
Jason advises the best way to determine if you actually need help with these processes is to hire a lawyer for an hour’s consultation, to explain your business and ask the type of legal services your business could benefit from, and most importantly why you will benefit from them.
“Everyone should have a limited budget when they start out and it’s important to prioritize your spending,” he says. “This initial consultation will help you do that.”
However, he warns, don’t assume that lawyers will offer those initial consultations for free. “Lawyers make money by charging for their time and expertise.” Free consultations are usually reserved for clients where the potential legal work will justify giving their initial time away. He advises to ask for consultation and phone call fees up front, so you know where your money will go.
Although, it doesn’t have to mean that those costs have to be expensive. In fact, many legal services are more affordable than most people believe. “Typically, the bigger the firm, the bigger the bill,” advises Dana. “There are lots of small firms out there that provide a quality service at more affordable rates.” If you put in the time to find the right person or firm to represent your business, at a fair price, it will provide you more time to work on making the money from the start.
Common Mistakes That Can Be Costly
And spending that money up front can save your business a lot of money. Both Dana and Jason have seen many instances where clients have simply not read the legal documentation they have signed thoroughly, getting their business in to trouble. Whether they are the creator or the receiver of the document.
Jason explains that although it might be tempting to just pull any legal template from the internet to use for your business it is important to thoroughly understand the terms before you use it. Of course, he admits, not all templates are bad, you simply need to understand the legal ramifications. “It’s better to buy an hour of a lawyer’s time to help you decide whether a template is what you need and is something you can do yourself, or if you need to explore it further and hire the lawyer.
And the same can be said for any contract you received from clients or suppliers. Dana observes, “So many people sign contracts without reading them. However, one small provision can make a big difference.” She also has seen many small businesses falter when they first startup where they create business relationships with people, under good faith, without formally putting anything in writing.
She advises, “The best time to create a formal document is at the beginning of the relationship. Think about the what-ifs that may happen add the scenarios to the contract. It will save you a lot of time and potentially money down the road, if your relationship falls apart.”
Finding the Right Person To Listen To
The line between business and personal life can often be blurry for entrepreneurs, observes Dana. It’s therefore important to find a lawyer that is engaging and who you can relate. Do they explain things in a way you understand? Do they listen to your ideas and suggestions?
Secondly, Jason says, make sure they have the experience your business requires. Not every lawyer can necessarily do everything that you need, so it’s best to find a lawyer who can bring the expertise you require or who knows another lawyer who can assist.
Do your research, ask for recommendations and look for reviews. Like every person that you will work with in your small business, it is important to find the right fit for both personality and skills.
Ask the Expert
Dana is Small Business BC’s resident expert in our Ask the Expert series. For just $40, you can book a 45 minute appointment with her to discuss your legal matters and find out the information you need. The service is available both in person and via Skype and will give you a great taste of the types of advice and services she provides. Book your appointment today.
Jason has been delivering legal seminars at Small Business BC for over 10 years. His current seminar, Getting Incorporated – Essential Steps and Legal Tips, runs monthly in the Education Centre and via webinar.
He is also the founder of Simply Legal an online business that offers incorporation services, legal kits and templates that can be purchased from Small Business BC.