Guest Blog by Adam Wogsland, Attorney at Law, Severson, Wogsland & Liebl PC
If you plan to start a business, you should get a lawyer involved right away. Why, you may ask? Well, here are just a few of the main reasons:
- Lawyers Save You Money.
Successful businesses know the value of time and allocate resources accordingly. We’re going to go out on a limb here and guess that you probably didn’t get into business to read legal documents. So you can spend the time reading laws and regulations to put your company on solid legal footing, or you can hire a lawyer who already knows how to do it.
For instance, every new business needs to form an entity. If you don’t form your entity correctly from the start, you’ll be dealing with it continually until it gets fixed. And as fun as that sounds, a lawyer could have helped you do it correctly the first time. The time you save and the peace of mind you have knowing it’s done right will outpace what you will spend on an attorney.
Still don’t believe us? Here are a few tips on how to save money by hiring a lawyer:
- Get a lawyer involved early. If you get a lawyer involved late, chances are that the lawyer has to fix something or that a filing deadline has been missed. This means lost time on your side and more money to pay for your lawyer’s time to fix the problem. As a general rule, prevention is cheaper than fixing, and both are cheaper than fighting.
- Be organized. If you do not have your thoughts and documents organized, then you will be spending money on your lawyer organizing everything for you. Organization by a lawyer is an inefficient use of your money.
2. Lawyers Reduce Your Risk.
Successful businesses reduce risk in all forms. Without a lawyer, you may not choose the right type of entity. You may undercapitalize. You may fail to observe corporate formalities. You may not properly organize governance of your entity. You may not properly govern your entity. You may not file the correct regulatory or licensure documents with the state or federal government. You may not structure and operate your entity in a way to avoid personal liability. You may not have the right documents memorializing the relationships between the owners in the event of a dispute. You may not plan for impactful contingencies like disability, death, bankruptcy, termination of employment, or divorce. You may not implement measures to reduce your employment liability risk. Lawyers will help you plan for and reduce these risks.
The risks are real. Liability protection is not automatic. Courts may disregard the corporate entity and allow creditors or plaintiffs to pierce the corporate veil if your entity is not structured and operated pursuant to the law. This means you (as the owner of the business) will be held personally liable for the entity’s debts and obligations. To drive this point home, this means your judgment creditor can reach your personal assets: personal property, deposit accounts, pets (yes, you read that right. Pets are personal property), cars, boats, homes (in North Dakota, any equity over $100,000.00), ERISA qualified plans like IRAs (in North Dakota, amounts over $100,000.00 for each plan; $200,000.00 in the aggregate), and wages.
3. Lawyers Provide Non-Legal Value.
Successful businesses know the value of relationships. We’ve seen many different clients in many different business spaces confront many different issues. Even if it’s not a legal problem and we will not be directly involved, we can help you find someone who can help. It’s good to have a network of trusted business advisors on your side.
Adam Wogsland is an attorney licensed in North Dakota and Minnesota and concentrates on helping small and medium sized businesses. This information is for informational purposes only. Please contact a lawyer to discuss the specifics of your situation.