An Ounce of Prevention
The following is a reprint of an article I wrote for the March 2016 edition of the Oakland Metropolitan Chamber of Commerce’s monthly magazine.
Everyone understands the value of lawyers if you are sued or need to sue someone who has damaged your business. Yet far fewer owners appreciate the value of consulting experienced business attorney before problems arise.
Just as in construction, when building a business one’s success depends on the time and energy spent establishing a solid foundation. Moreover, having an awareness of the consequences of the decisions one makes regarding one’s business is critical to the preservation and enduring stability of that business.
Having spent decades as a trial lawyer, I have the experience and insight to predict the kinds of mistakes most business owners are likely to make. I also know with relative certainty what the impact will be on a company when a particular mistake is made. This is not to say I’m clairvoyant; I’ve simply witnessed patterns in the hundreds of lawsuits I’ve analyzed and litigated.
I also know that the cost of cleaning up these types of mistakes is exponentially higher hiring a good transactional lawyer in the first place. Given the opportunity, such an attorney can craft the appropriate types of business structure, agreements, policies and procedures to reduce the possibility of catastrophic risks occurring. And such planning will also mitigate and reduce the effects of these occurrences. Stated otherwise, proactive planning is always cheaper and more effective than reactive crisis management.
Unfortunately, an increasing number of business owners choose to “save money” by using legal documents they find on the internet without ever consulting an attorney. Far too often, this type of “citizen lawyering” results in contracts and other documents that are completely unsuited to the particular business, and that lack basic legal protections. I’ve seen California businesses using contracts intended for use in Australia, setting up the wrong type of business entity, and as a host of other horror stories.
The lesson to be learned is that the more thought and time you spend identifying, understanding and planning for the risks your business may face, the more likely the company will survive and thrive. Consulting an experienced business attorney is key to this process.
When assessing any business client, among the questions I always ask are:
(1) What are the potential risks this business may encounter in the industry it inhabits?
(2) What type of entity or structure is best suited for the business, and that will provide the optimal legal protection and financial benefit?
(3) What are the legal requirements and procedures the owners must follow to retain the financial benefits and legal protections the business entity and structure can provide?
(4) Do the contracts and agreements the business uses provide appropriate protection against the types and frequencies of risks the business will face?
(5) Is there a written plan to protect the company and its owners in the event of a catastrophic event?
With these answers, an experienced business lawyer can help the owner proactively plan so as to support the business’ stability, growth and longevity. Contact our office if you think your business might benefit from such a conversation.