NFIB

Five Times When Small Businesses Need To Consult With an Attorney
05/ 08/ 2002

Working with attorneys can be time-consuming and expensive, but there are specific times when every small business owner should strongly consider consulting with experienced legal counsel. Jeffrey Moses describes these important instances in today's Workshop.

1. When entering a partnership agreement.

Most owners don't hesitate to work with an attorney when setting up and filing incorporation papers, but might think that a partnership agreement can be handled informally, which isn't the case. Your entire financial future might depend on an accurate, complete, fair and mutually acceptable agreement between partners. This agreement needs to be in writing, signed, notarized and understood by all parties as legally binding. As an added note, an attorney should be consulted when deciding whether to incorporate or remain a sole proprietorship or partnership.

2. When purchasing or leasing equipment.

All your leasing papers, sales documents and vendor warranties should be examined by an attorney. You put your company on the line financially when you buy or lease equipment of any type, and you should be certain that your best interests are represented in the agreements.

3. When writing your company's sales/purchase contracts for customers.

Make sure you discuss the following points with an attorney: contractual obligations such as delivery, service agreement and replacement/repair options; enforcement of non-payment by customers; warranty terms and durations; agreements with vendors or contract service providers such as product suppliers and repair services; and contract sales personnel.

4. When determining compliance with federal or local regulations for employee relations or workspace conditions.

These include employee hiring guidelines, employee relations and federal and local workplace safety regulations.

5. When preparing to raise funding of any kind, even from friends and relatives.

It may seem easy to ask your uncle for a business loan, but the agreement between you should be legal, and to the benefit of both parties. The same is true for funding from a bank. Don't think that a simple bank loan is less important than, for instance, venture capital funding or a public stock offering. Treat all loans with the utmost importance. Points to consider: terms of repayment (Is there a balloon payment? Is there a penalty for early payoff?); limits and terms of interest variance for variable rate loans; and interest and payoff periods for lines of credit.

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