We may not always like it, but us business attorneys know that you business owners are often out there wheelin’ and dealin’ with handshakes and a hope for the best, and in many cases that works out okay. We would like you to more frequently call us to discuss the terms, evaluate the risks, and make sure you’re protected. But we know that we’re operating in the real world, not an ideal one, and so there are many things happening with your business that are never going to cross our desks.
And that’s often okay. But not always. There are certain situations and scenarios that you will encounter in your business that are too serious not to involve legal counsel. Here are five that require the immediate attention of an experienced business attorney.
Corporate Structure. Whether you’re starting a new business, adding a partner to an existing one, or winding down a business, it’s important to consult with your business attorney. Corporate structure impacts many aspects of your business, including how you make decisions and how you pay taxes. It also establishes the line between your business assets and your personal ones. So from deciding on the right type of business entity and structure, to preparing shareholder agreements, buy-sell agreements, and operating agreements, don’t go it alone.
Taxes. Many businesses and business owners can deal with minor tax issues on their own or with an accountant, but there are certain situations where calling an attorney is critical. In some cases, these include reactive situations, such as when a tax agency notifies you that it intends to take enforcement action to collect unpaid tax liabilities. In other cases, it will be a situation where proactive steps are required, such as when you discover that employee withholding taxes have not been submitted to the IRS for some extended period of time. Business tax liability is not an area to mess around with, because it can lead to personal liability.
Employee Issues. One of the most common scenarios that leads to lawsuits against a business is the mishandling of employee issues. Too often, business owners only get an attorney involved after the fact, when an employee issue has already blown up, rather than in advance when something could still be done about it. When an employee (or yourself) says or does something that could give rise to accusations of sexual harassment or discrimination, or you’re thinking of firing an employee with whom you/your business has a contentious relationship, make sure to call your business attorney.
Buying or Selling Assets: You don’t need to call your business attorney every time you buy or sell an asset, but you should when a purchase or sale is “significant” (which means different things to every business). One clear sign that a transaction is significant is if you’re borrowing money to finance it, which likely means a lender will want a security interest in your business assets, as well as a personal guaranty. Another sign that you need to call your attorney is when the party you’re selling to or buying from hands you an agreement (or agreements) to sign. It’s important to know what you’re agreeing to, which may go well beyond what you think. Hopefully your business attorney already has prepared a form agreement for you that can be used in many of your run-of-the-mill, insignificant transactions. If not, give them a call.
Succession Planning. A business succession plan, like an estate plan for an individual, is something that requires clear-eyed, strategic thinking. It’s not something to put off until it becomes an urgent necessity. It’s important to involve your business attorney early on in the process so they can help in both the planning and execution phases. Your plan may involve transitioning the business to family members or employees, or simply selling its assets to a strategic buyer, among other options. Regardless, to exit well, including maximizing value and minimizing tax liability, it’s best to start early and think creatively about what your options may be, and your business attorney can help in that process.
It’s critical to have an experienced business attorney by your side to ensure the successful startup, operation, and, in some cases, ultimate sale of your business. If you require assistance or have questions about any of these or other issues related to your business, please contact Zana Tomich.