These days, it’s easy to find information online about how to do your own legal work. Free videos will show you how to form your own corporation and you can purchase a template for nearly any kind of contract you might need for just a few dollars. If you’re good with paperwork, you might think there’s no reason to spend money on a lawyer.
We get it. Few of us start a business with as much capital as we need. It’s much more likely that we’ve risen only some of the money required and are putting the rest on credit cards or taking out loans. However, saving some money at the beginning by trying to do your legal work yourself can cost you many times that amount down the road.
Let’s look at forming a corporation. It’s a one-page form in California – simple enough, right? Well, until you click on your options. There are seven different types of corporations that can be formed in California. Do you know which is appropriate for your business? Perhaps an LLC, a limited liability company, would be more beneficial to you at tax time? The answers depend on many factors that a licensed small business attorney can help you sort through to make the best decision.
Did you know that the information you put on that original filing will be posted on the Internet for everyone to see? They won’t even need to pay a fee or log in to access it. This can be troubling if your small business is operating out of your home and you’d prefer not to be bombarded by everything from salesmen to bill collectors to process servers, or if you don’t want your personal information out there for identity thieves to harvest. Again, an attorney can help you protect your personal information.
Now let’s look at contracts. That template you downloaded for only $4.99 looks well – but is it legal in your state? Contract laws vary greatly depending on where your business is based. California is a very employee-friendly state, one where the penalties for making a mistake, like preparing an employment contract with an illegal provision, can cost you many thousands of dollars.
Let’s say you’re in the music business and think that you’ll get off the ground with the help of an intern who will eagerly work for free to get their foot in the door. These days, very little internship without pay is recognized as legal by the courts. Paying the legal minimum wage and observing the law with respect to workers compensation insurance, taxes, hours and rest breaks may seem expensive, but it’s nothing compared to the six figure court judgments some interns have received after successfully suing their former employers.
Another easy mistake to make believes you can pay someone on a 1099 basis – just write them a check, hand them cash or send them an electronic payment whenever they work. The law has significantly tightened with respect to which types of positions can be paid that way. If you’re telling that person what time to show up, and they’re working at your place of business taking direction from you about how to do the job, the odds are that they will need to be on payroll as your employee. We can evaluate your particular business situation and determine the best ways for you to keep labour costs down while avoiding exposure to expensive penalties and lawsuits.
What about your facilities? If you don’t own the space and will be renting, how can you ensure that you work out a lease with your landlord that protects you and allows you to run your business effectively? A boilerplate lease won’t do the job in most cases. You may need specific wording about noise, the hours that you’ll need access or the temperature at which the building must be maintained to protect your products. Is the rent, or it is the rent plus utility and maintenance charges that may be variable and hard to predict? What kinds of signage are you allowed putting up? This is just a small sample of the questions that your attorney will review with you before advising you to sign on that line and commit yourself to what is typically a multi-year lease.