When you start a business, there are likely occasions on which you already know it might be best to consult an expert on a particular subject. Whether that’s on the financial end of things, or as you begin marketing, or at the inception of your company, the fact of the matter is that you just can’t do it all by yourself. While you may know you need to find a bookkeeper, one aspect of running a startup company that many people overlook is the need for legal representation.
“Why does my startup need legal representation?” you might ask. If you’re on your own, you may think that you have things handled, and your goal should be to avoid legal steps as long as possible. Not so! Having legal representation early on in your business can be extremely helpful in the long run.
Here are three points at which your startup ought to pursue legal representation:
Forming a Legal Entity
When you start out, there are many options for the type of legal entity you might choose to form your business. Whether you’re a sole proprietorship, corporation, LLC, or partnership depends on a wealth of factors and affects your personal liability. Choosing can be difficult and will define how your business functions for the entirety of its existence. It’s wise to consult legal counsel at this point to ensure that you file in a way that matches your goals for the business.
Hiring Employees
Another critical moment for your startup is the moment you decide that it is necessary to hire employees. You’ll need to put together an employee agreement and staff handbook using language that protects you, your business, and your employees by clearly defining each party’s rights and responsibilities. You will also want to ensure that you have a payroll processing system in place and clear documentation stating how compensation works. Consulting your legal representation at this point is essential, since these documents will define the relationship you have with your employees, and you want to be protected from any liability in that situation.
Raising Capital
If you’ve fully developed your business idea and are ready to expand quickly, you may be in the position of needing significant funding to do so. When you’re ready to bring in outside funding, whether through a traditional bank loan, angel investors, or venture capitalists, it can be extremely valuable to get legal advice before doing so. There are extensive regulations for startups regarding the raising of funds—even from friends and family—and you’ll want to have an expert on hand to ensure that you’re not in violation of any of those regulations.
This is, of course, not a comprehensive list of situations where legal counsel might be beneficial for your startup, but just a few of the major ones. These situations are vulnerable points in the evolution of your company, where one misstep could cost your young business a lot of time and money—something you may not have much of at this point in the game. By protecting yourself at these key moments, you’ll ensure that your startup is given the opportunity to grow and prosper for years to come.