What do all successful business founders have in common? The most consistent trait amongst successful business founders is that they are able to leverage the knowledge and technical experience of subject matter experts and integrate it with their own vision and ambition to build something disruptive and worthy.
Think about it. How much coding does Mark Zuckerberg actually do? What did Arthur Lok Jack really know about chocolate and food manufacturing before he bought Charles Candy and turned it into the regional giant that is Associated Brands? Both these men have built billion-dollar companies, but they didn’t do it alone.
And you know another thing that you’ll find common with all these businesses? They all rely on the services of qualified legal professionals to keep their business out of trouble or get it out when trouble comes calling.
As a small business owner, you should recognize that the business environment is rife with risks. And just as you would need an accountant to help manage your financial risk, you need a corporate lawyer to help combat and minimize your legal risk.
If you have been in business for many years and are still wondering if you really need a corporate lawyer, you may have exposed your business to serious legal risk already. If your business is still new, then you may be just in time. Here are 8 reasons why you need to contact a corporate lawyer pronto.
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#1: Advice on business structure
All businesses must operate within a structure. This is because, at its most fundamental, the law relates to businesses on the basis of their structure. For instance, company tax laws cannot apply to you if you run a sole trader. But once you establish an LLC, no matter how small, these laws apply.
For businesses that fail to seek relevant advice regarding the appropriate legal structure for them, serious problems can ensue. Apart from this, you may lose out on several legal benefits of using one structure over the others.
#2: Draft and review legal documents
As a business owner, you will be involved in the creation of numerous legal documents. These could range from notices on obligations expected from you by the authorities to documents of lease relating to property.
They could also involve infinitely more important documents such as your company’s articles of incorporation, by laws, or your founder’s/shareholder’s agreement, which form the backbone of your business.
All of these documents will include provisions that should be dissected and properly explained to you in order to protect your business’ interest. A corporate lawyer will be vital to ensuring that you are not cheated on these documents and provide assistance with drafting favourable documents when the need arises.
#3: Provide advice on crucial business contracts
How many times have you begun negotiations with a supply partner or someone else and saw terms or provisions you didn’t understand? If this has happened to you frequently, you’re already courting trouble.
It is incredibly dangerous to enter into agreements which you don’t understand or the ramifications of which are not clear to you. Having a corporate lawyer on your end of the table ensures that you can tell exactly what is on the table and what you need to do to make it more favourable.
#4: Perform due diligence
Due diligence refers to measures that a diligent buyer or seller should take before entering into a binding agreement. It especially relates to the sale of land, a stake in a business, strategic partnerships and joint ventures etc.
The need for due diligence arises from a legal rule: “caveat emptor” or buyer beware. Basically, it means that if you enter into a binding agreement without finding out facts you could have if you had taken the trouble to, you will remain bound by the agreement.
So, if you sold a stake in your business to a buyer and thereafter discover that they’re going bankrupt, you may have sold your business for peanuts. And you will be bound by the agreement. But by involving a corporate lawyer from the start, they could help you investigate the buyer thoroughly, so you are certain they have the capacity to buy.
#5: Keep an eye on regulatory changes
Even when a corporate lawyer is not actively providing advice on your day-to-day business activities, they are vital for keeping updated about regulatory changes and how they affect your business.
There are two advantages here. First, you can get a broader spectrum of updates from a corporate lawyer than you would get on the news, Facebook or some other subscription. Second, along with the updates from your lawyer, you can get detailed advice on how the changes affect you and what you should do about it.
One of the common reasons for business failure, as found by CB Insights, is an inability to keep up with regulatory changes. Did you know the Companies Act was amended in 2019 to include the issue of share issuance and beneficial ownership? No… Well your Corporate Lawyer could have kept you abreast. Don’t let your business be taken by surprise. Retain a corporate lawyer for timely notification and advice.
#6: Counselling on employment-related issues
If you have even a single employee, then this is advice you should not be missing out on. Most labour and employment laws apply whether you have one employee or hundreds. Do you adhere to requirements such as minimum wages, maternity, sick leave, holiday entitlements etc?
All of these laws impose specific obligations on employers and will require active integration into your business processes. If you don’t do what is expected of you, your business will be open to legal liability. And as far as the law is concerned, ignorance of the law is not an excuse.
A corporate lawyer will explain all the laws that should apply to your business, based on your industry and legal structure. They will also advise you on how to comply with them.
#7: Legal support to your accountants
No matter how good your accountant is, they will always benefit from the involvement of a good corporate lawyer. That’s why at FirstLink we provide businesses with a comprehensive range of finance, legal and HR solutions. While your accountant’s responsibility is to arrange your financial affairs in line with best practices and legal rules, your lawyer will be vital to explaining the legality of your financial practices.
Perhaps most importantly, they will be very vital to explaining how those practices have been perceived and interpreted in the courts and what it means for you. So, if you are thinking about trying out a tax avoidance move, you should obtain specialist advice on its legality or otherwise.
#8: Elude or fight legal challenges
Although a corporate lawyer’s main brief is to keep your business out of trouble, there’s no better partner you’ll want if trouble comes anyway. Your corporate lawyer will be vital to assessing the level of legal threat and what steps can be taken to diffuse the situation.
And if all else fails, they will be able to either fight aggressively on your behalf whether that is via mediation, arbitration or litigation.
Although you may look on the services of a corporate lawyer as a luxury that your business may be unable to afford, your view may be wrong. Rather, not having a corporate lawyer on your side may be the most dangerous luxury that you can ill afford.
To ensure that your business gets on and remains on the right legal path, do your best to retain a sound corporate lawyer. It may not be as costly as you may think. At FirstLink, we offer several packages to suit the budgets of startups and small to medium businesses.
We also offer a Legal Health Check solution which is a cost-effective way to determine what risks your business may be exposed to. If you would like to discuss the various risks your business may be exposed to and remedies to solve them, schedule a free consultation today to learn more about how our services can protect your startup or small or medium business.