Whether you like it or not, as a small-business owner you will have to work with attorneys at some point. Given the inevitability of this interaction, it is wise to set the best possible foundation for these relationships. Even with limited resources like funds, office space, or employees, there are a number of common pitfalls you can easily avoid with proper communication and an ardent research process.
As a small-business owner, you might need to work with an attorney to:
- Incorporate your business as an LLC, LLP, etc.
- Consult on hiring and firing decisions
- Draft and sign vendor and supplier agreements
- Draft employment contracts
- Protect your company’s trade secrets with well-drafted non-disclosure agreements
- Make sure that none of your company’s inventions infringe on existing trademarks, patents, etc.
What are common complications in the small-business owner / attorney relationship?
The most common pitfall in these relationships is communication. A 2012 American Bar Association survey found that most outside attorneys are replaced because of poor communication. J.D Houvener, CEO of Bold Patents, says that “poor communication can lead to a disconnect in terms of expectations between clients and attorneys, and when this happens, crucial information slips through the cracks.” Surprises and errors, especially those that are high visibility, upset internal stakeholders within one’s business. Basically, when the relationship between the business owner and the attorney is strained, it makes the business owner look bad while making his or her life hard.
Best practices for small-business owners to improve their relationship with outside counsel:
- Communicate clearly, concisely, and effectively.
- Document everything in writing so you have a reference point if a disagreement arises.
- Ask clarifying questions to ensure understanding at every point. Don’t let something slip through the cracks because you are afraid to say you don’t understand.
- Check in often to make sure your expectations of one another are clear.
- Set up regular calls to create consistency in management.
- If local, invite your attorney to your office/HQ. Show them around, introduce them to your employees, and make them feel like they are part of your team.
Here are some tips on how to avoid the most common pitfalls that create a poor attorney-client relationship:
Find an attorney with industry-specific expertise: When hiring outside counsel, find an attorney who has experience working within your industry. You can do this by asking around for word-of-mouth recommendations, looking at firms and attorneys your competitors have used, and asking high-level questions when considering potential candidates. Experts within your field will be more likely to understand your needs, foresee complications, anticipate legal threats, and respond to your requests. This will naturally improve communication and reduce errors.
Choose a law firm that aligns with the size of your business: If you are a small business, your needs will likely not be met by a bigger firm. A small business should hire a small-to-medium-sized law firm to obtain sound legal advice from lawyers who actually speak your language. Lawyers from smaller firms have more flexibility with timing, have fewer clients to deal with on a daily basis, and their costs are likely more manageable.
Hire a lawyer who will relieve your burden, not add to it: Small businesses often have strained resources. Founders and entrepreneurs who are driving the growth wear many hats: they file their own taxes, make the product, sell the product, etc. When done correctly, an attorney should relieve some of the burdens of having to manage everything on your own. By contrast, hiring the wrong person could lead to more headaches and work for you down the line. Having the right go-to counsel is great because they can see issues as soon as they pop up, they have relationships outside the company, and they’re able to make time for you.
What makes for effective counsel?
The most critical quality of an effective outside attorney is the ability to communicate information clearly and concisely. The best outside counsel will care about the your business’s owner, its clients, and its trajectory, and know what is expected of him or her. Ideal outside counsel must be creative and think outside the box to find new ways to solve problems and improve existing methodology. Basically, an effective outside counsel will make you look good while making your life easier.
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Houvener expands on this and says that, in his ideal outside counsel, he seeks “someone that can do a lot of good work without a lot of supervision. The person should not need a lot of oversight, but be responsive and accountable. He or she knows your needs without having to ask and sees the bigger picture.”
Most small-business owners did not receive a formal legal education. An effective attorney can give legal advice that the small-business owner can understand, and takes the initiative to clarify information when necessary.
Overall, a good attorney is critical when developing a new business, no matter what sector you’re in. If you start a good attorney-client relationship early on, your business will benefit as a result.
Carly Klein is a law student at Loyola Law School in Los Angeles. A graduate from Boston University with a B.A. in political science & philosophy, she has experience in marketing, communications, and sales. She is a Los Angeles native and seeks to pursue a career in IP & business litigation.