This is the first post in a series of legal related articles written by FreshBooks customer and small business expert Nellie Akalp, who is the CEO of CorpNet.com – an online legal document filing service.
If you’ve ever wondered if you’d be better off saving your money and handling legal matters on your own, you need to read this post. While I certainly don’t have anything against lawyers (I’m married to one and I myself graduated law school back in 1998), there are times when attorneys are overused in business – and those unnecessary retainer fees and high hourly rates can really sting the small business budget.
The following recommendations tackle commonly asked questions to help you identify which legal business activities can be addressed independently and which really do require expert legal help:
#1. Should I incorporate my business or form an LLC?
Too many entrepreneurs think they need a lawyer to create a legal business structure, whether it be incorporating a business, forming an LLC, or simply filing as a Sole Proprietorship, when viable alternatives exist that can save significant dollars and be just as reliable. You can work with a reputable online business filing service such as my company, CorpNet.com or just download the forms and submit them to your state’s secretary of state office (if you’re in the US). In the eyes of the law and IRS, your business structure will be just as valid than if a high-priced attorney sent in the documents for you.
There are two caveats. One, your business structure has significant implications on both your business and personal taxes. For this reason, you may want to chat with a CPA or tax advisor on what structure is right for you, and then file the forms (without a lawyer).
In addition, most small businesses have very basic business formation needs. However, if your business is particularly complex – for example, you have strict requirements for shareholder structure or stock allocation, or you’re dealing with millions of dollars up front — you should retain your own expert counsel to help get you started.
#2. Do I need a lawyer to choose a business name?
Before you start ordering business cards or printing your marketing material, it’s wise to research whether your selected business name is legally available for use. You definitely don’t want to be on the wrong end of a trademark dispute. In most cases, you don’t need an attorney to check if your name is available; you can perform these easy steps on your own:
#3. Am I required by law to register a trademark?
No, you’re not actually required by law to register a trademark. Use of a name instantly gives you common law rights as an owner, even without formal registration. However, when you register a trademark with the U.S. Patent and Trademark Office, it’s exponentially easier for you to recover your properties…for example, if someone happens to be using a close variation of your domain name or is using your company name as their Twitter handle.
When it comes to registering a trademark, you can handle this without an attorney (either on your own or with the help of an online legal filing service). One word of advice: you should perform a comprehensive trademark search first to make sure your proposed mark is available before submitting an application. If your name turns out not to be available, your application will be rejected right away, meaning you’ll lose your application fee, not to mention all the time invested in the application.
#4. Should I use a lawyer to create Non-Disclosure Agreements (NDAs) and Contracts?
You can prepare client contracts, partner or vendor agreements, and NDAs without the assistance of a lawyer. There’s no shortage of templates available for download on the Web – even FreshBooks has a free sample contract for web designers you can use for web design projects. And here’s six more contract tips to help you avoid trouble.
#5. Is it necessary to have legal help when filing for a patent?
Acquiring a patent can take up to six years and hundreds of hours of work. Due to the complexity of the process, it’s wise to turn to an attorney, patent agent, or licensing firm. Unfortunately, this can mean approximately $7K-15K in attorney fees, but your patent application will be done right. And in the long run that can be more affordable than spending hundreds of hours of work on a DIY patent application that doesn’t make the cut. If you do choose to apply for a patent, look for an IP pro who understands and specializes in your particular market.
#6. What do I do when faced with litigation?
If your business is involved with any lawsuits (for example, a discrimination lawsuit from a former employee), you’ll need to hire an attorney. However, this is a worst case scenario for most small businesses. A more common situation for the contract and freelance community is when a client ignores your polite albeit persistent reminders to pay (here are a few tips if the client relationship turns sour). In many cases, consulting a lawyer and having them send a formal letter on your behalf is usually enough to secure a response and you can avoid the trouble and cost of small claims court.
When it comes to legal matters, trust your gut: if you feel like you need to bring in expert counsel, then by all means do so. Just remember that you are able to handle a good deal of legal matters associated with starting and running your business without a lawyer. And you can use all that saved dough to drive your business forward!