Should a Small Business Retain a General Counsel?
Updated: Jan 4, 2019
The answer on whether a small business should retain a general counsel is generally yes, but there are understandable reasons for why many businesses do not. While most entrepreneurs would say that they understand the benefits of having a relationship with a business attorney, many never take the step of doing so until a major event has already occurred. The decision not to retain an attorney usually boils down to two reasons; first, it is too expensive and second, an entrepreneurs instinct to go it alone and attempt to solve the problem without assistance.
While it may seem strange for an attorney to say this, I understand why entrepreneurs feel the way they do with the traditional legal model, but I believe there are unique solutions that are gaining traction that will help to bridge the gap between small business owners and the legal services market.
Is it Too Expensive?
For a business under $1MM in revenue in most instances hiring an on-staff attorney would not make financial sense. The salary and benefits as a % of sales would likely be prohibitive. What about retaining a business attorney on the traditional hourly billing cycle? The traditional hourly fee structure, while appropriate in some instances, also contribute to the inherit conflict between small business and lawyers by charging high hourly rates with little certainty as to the final cost for the owner thereby creating profit and loss uncertainty.
Can You Figure It Out Yourself?
If someone has the gumption and grit to start a business and build it up from the ground, I have very little doubt that with ample time, resources, study, and limited distractions that they could properly allocate the business risk and not expose the business to unnecessary and expensive future liability. The problem is that small business owners are distracted and do not have ample time to put towards just one facet of the business operations. An often-used example to illustrate the above is whether to hire a Dentist to perform a root canal or whether to do it yourself. While this is a funny example it does illustrate the point that with careful study most of us could figure out how to perform a root canal, but having a professional who has dedicated himself or herself to the study of Dentistry makes us feel a lot better about the process and typically ensures better results.
How do We Bridge the Gap Between Small Business Owners and Legal Profession?
We start by rethinking how we approach the problem. What if a small business could retain a general counsel but on a part-time basis? This would provide all the benefits that large businesses have without the overwhelming cost of hiring a full time on staff attorney.
A new trend that is just starting to take form, which Matt Devitt Law, PLC, is proud to offer is “Outside or Part-Time” General Counsel programs focused on the needs of small business. This unique program gives the small business owner the opportunity to obtain the business and legal benefits from the use of an in-house attorney without the cost of directly employing an attorney. These programs usually offer “Unlimited Communication”, meaning the attorney wants you to contact them and talk about issues, plans, goals, and become an integrated member of the team. You can do this without worrying about getting charged for every phone call and email. One of the many benefits of the program is that it helps to dispel the myth that small businesses can’t afford a “General Counsel” on their side.
Imagine the relief of saying “my attorney will handle that”. For a yearly retainer, usually under $800/month a small business, should expect the following core services to be included.
Specific General Counsel Solutions & Services Provided:
In addition to unlimited communication and legal research; quarterly in person legal check-ups; and ability to say our attorney will handle that, a small business owner should also expect to receive the following.
1. Entity Formation Review – Ensuring that your business structure and founder’s agreements are accomplishing your goals.
2. Contract Review, Drafting and Negotiations (Business Operations) – Review all operating contracts (common list below) and advice you and offer suggestions to improve your position in the contract. Whether you need a master service agreement for your clients, review of existing or proposed contracts that you are considering, negotiation of new contracts, modifications to existing contracts, attorney should make sure that your business relationship is properly documented and advances your business goals.
a. Sales of Goods and Services
i.Terms and Conditions of Sale
ii. Master Services Agreements
b. Distributor Agreements
c. Electronic Commerce
d. Equipment Lease
e. Real Estate
i. Commercial Lease (Retail)
ii. Real Property Purchase Agreement
3. Employment and Services - The relationship between employer and employee is one of the most important in your business. Attorney should examine your employee classification, application and preliminary forms, separation agreement and other aspects of your relationship with your employees to ensure compliance with Federal and State Labor laws.
a. Application and Other Preliminary Forms
i. Credit report authorization
ii. Certification of acknowledgement
iii. Drug testing consent
iv. Offer letter
b. Employment Agreements and Policies
i. Rules of employee conduct (employee handbook)
ii. Workplace harassment policy
iii. Computer network, electronic device and internet usage policy
iv. Social media policy
v. Arbitration agreements
vi. Confidential information and invention agreement
vii. Confidentiality, non-competition, and non-solicitation agreements
viii. Indemnification agreement
c. Independent Contracts and Other Third-Party Agreements
i. Consulting agreement
ii. Temporary help and client service agreement
d. Releases and Other Separation Agreements
i. Separation agreement and general release
ii. Settlement agreement and general release
iii. Severance benefit agreement
e. Family and Medical Leave Act
i. Notice of eligibility and right under FMLA; certification
ii. Designation notice
4. Banking and Commercial Finance – Attorney should act as your partner as you negotiate with your bank to address current or potential lending agreements.
a. Promissory notes
b. Guaranty to creditor
c. Security agreement
e. Irrevocable letter of credit
f. Subordination agreement (priority between creditors of common debtor)
5. Intellectual Property – While many business attorneys don’t offer advice on patent protection, you should expect advise and help in obtaining the necessary protection for your intellectual property, whether it be trademarks or copyrights.
a. Trademarks, service mark application, and principal register
6. Pre-Litigation, Litigation Avoidance, and Dispute Management – Litigation is almost always an inconvenience and disruption to small business operations. Sometimes litigation simply cannot be avoided without abandoning your hard-won rights or just position. However, we appreciate that most clients prefer to avoid litigation wherever possible and will partner throughout the entire process on strategies to avoid the escalation of the dispute.
While not every business needs to retain a general counsel to properly allocate risk and navigate the ever-changing legal waters, for those that do, consider asking your business attorney about a part-time General Counsel service arrangement. These programs offer the best of both worlds and will provide a solid legal foundation for business owners to continue to build upon in the future.
** Disclaimer - The information you obtain from this blog post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. (email@example.com or 734-335-0713)