You have decided to start your own business, and want to do the right things for it from the beginning. You know that most businesses fail before the five year mark, and know you must make the best financial and legal decisions possible. You know lawyers aren't cheap, and must make the decision of where the initial seed money is to be spent. So many other early expenses: Rent or mortgage payments, new office furniture, computers, etc. staffing costs, insurance. The question is what value a lawyer brings to the table of a new business when hard decisions must be made about expenses. In this article, I hope to help you make that decision.
The first priority of starting a new business in South Carolina should be incorporating that new business with the state secretary of state. In South Carolina, that process can be completed on-line, including payment of the filing fee by credit card (filing fee for a limited liability company in SC is currently $110). This process is simple enough that a lawyer would not have to do it for the business, but for a small flat fee a lawyer would be worth getting it done correctly. In setting up a business (either corporation or limited liability company) with multiple owners/partners, it is worth it to hire a lawyer to draft an operating agreement between partners. This is important to be done correctly, as it will govern relations between the owners: Who has what percentage of ownership, and draws what percentage of the profits after expenses? What is the agreement for owners leaving the business? What is the agreement of owners about management of the business? What about non-disclosure agreements? These are just a few of the major considerations for the operating agreement, and without a lawyer partners could end up in litigation.
Once the business is incorporated and any necessary operating agreement drafted, the next step is ensuring the other administrative details are performed correctly. For example, it is important to request a Tax ID number (Employer Identification Number) and a corporate bank account separate from any personal bank accounts. This can also be performed by non-lawyer owners, but for a small flat fee a lawyer would ensure it is done correctly. For many types of businesses, having the right insurance is either required to maintain a license, or a "de facto" requirement to ensure the business is protected. This is also something owners could acquire, and review the terms of the insurance.
If the business was properly incorporated, it is then important to follow appropriate corporate formalities. After incorporation, business owners in South Carolina have a legal "shield" from most types of personal liability. Any lawsuits based on activities associated with the business (for example, an injury of a third party by the negligence of an employee, or a "slip and fall" on the property of the corporation) must be brought against the corporation as an entity, and not the individual owners. The insurance is then for covering any potential claims against the corporation. A lawyer can help ensure the owners are fully protected by ensuring corporate formalities are met. In South Carolina, under the concept of "piercing the corporate veil", owners could be held personally liable for claims associated with the corporation. If the corporation is shown to be a sham, and not run as a corporation, the owners could face that risk. This is again why a lawyer could be helpful with the corporation.
When the business is off and running, having an attorney on retainer can be very helpful to staying out of trouble with potential "legal minefields". Decisions about hiring and firing, following regulatory requirements like eVerify, the list goes on and on. In our firm, we offer what I believe to be a good deal for the small business to stay out of trouble at a low cost. We ask that the small business keep a moderate amount of retainer in escrow, but we do not charge a recurring fee. We only charge the retainer if we are requested to perform legal work. For example, if the business plans to fire an employee in a unique situation, they could call our office to ask about the situation and how to proceed without incurred legal risk. This type of arrangement is something most small businesses can afford, and worth it to save the resources and stress of legal problems.