Follow these steps to get small business legal advice.

If your legal problem is complex or involves lots of money, you might not want to attempt to handle the entire matter without a lawyer. After all, lawyers do more than dispense small business legal advice or information. They offer strategic advice and apply sophisticated technical skills to legal problems. Ideally, you’ll be able to find a lawyer who’s willing to serve as your legal “coach” to help you educate yourself to the maximum extent possible and to take over as your formal legal counsel only if necessary.

How to Find the Right Lawyer

Don’t expect to find a good lawyer by simply looking in the phone book or reading an advertisement. There’s not enough information in these sources to help you make a valid judgment.

Personal Referrals

One approach to finding a provider of small business legal advice is to get personal referrals. But don’t make a decision about a lawyer solely on the basis of someone else’s recommendation. In addition to the fact that you may need a different type of small business legal advice, different people will have different responses to a lawyer’s style and personality.
It’s only when you meet with the lawyer and discuss your case, that you can decide that you feel comfortable working with him or her.
Also, it may be hard to find a lawyer with the expertise you need through a personal referral.

Business Referrals

Businesses who provide services to key players in the legal area you are interested in may also be able to help you find a lawyer you should consider. For example, if you are interested in small business legal advice, speak to your banker, accountant, insurance agent, and real estate broker. These people come into frequent contact with lawyers who represent business clients and are in a position to make informed judgments.

Consider a Specialist

Most lawyers specialize in certain areas, and even a so-called “general practitioner” may not know that much about the particular area of your concern. For example, of the almost one million lawyers in America today, probably fewer than 50,000 possess sufficient training and experience in small business law to be of real help to an aspiring entrepreneur.
It can pay to work with a lawyer who already knows the field, such as employment discrimination, zoning laws, software design issues, or restaurant licensing. That way you can take advantage of the fact that the lawyer is already far up the learning curve. For example, need an Employment Lawyer?

Interview the Prospective Lawyers

When you get the names of several good prospects, the next step is to talk to each lawyer personally. If you outline your needs in advance, many lawyers will be willing to meet to you for a half-hour or so at no charge so that you can size them up and make an informed decision. Some aspects you should consider:

Personality

Pay particular attention to the personal chemistry between you and your lawyer. No matter how experienced and well-recommended a lawyer is, if you feel uncomfortable with that person during your first meeting or two, you may never achieve an ideal lawyer-client relationship. Trust your instincts and seek a lawyer whose personality is compatible with your own. Look also for experience, personal rapport, and accessibility.

Communication and Promptness

Ask all prospective lawyers how you will be able to contact them and how long it will take them to return your communications. And don’t assume that because the lawyer seems friendly and easy to talk to that it’s okay to overlook this step.

You want a lawyer who will work hard on your behalf and follow through promptly on all assignments.

Willingness to Work With You

When you have a legal problem, you need legal information. Lawyers, of course, are prime sources of this information, but if you bought all the needed information at their rates — $150 to $250 an hour — you’d quickly empty your bank account. Fortunately, many lawyers will work with you to help you acquire a good working knowledge of the legal principles and procedures you need to deal with your problem at least partly on your own.

If you are hoping to represent yourself and use a lawyer only for advice, make sure the lawyer is open to that type of set-up.
Likewise, if you’re going into business and will draft your own bylaws or business agreements, ask the lawyer if she’s open to reviewing your drafts and making comments.

Other Resources

SmallBusinessFreeForms.com – Free business form templates

The post Small Business Legal Advice appeared first on How To Start a Business Guide.

Before going into partnership advantages and disadvantages and especially before starting a partnership, let’s first define “partnerships” and make sure we know how they operate. The particular rules about partnerships lead to the partnership advantages and disadvantages.

Partnerships Defined and Explained

A partnership is an agreement between two or more people to finance and operate a business.

Partnerships, unlike sole proprietorships, are entities legally separate from the partners themselves. In a general partnership, however, profits and losses flow through to the partners’ tax returns.

Each general partner has equal responsibility and authority to run the business. Each partner should be involved in day-to-day operations of the business, and should make management decisions.

Any partner may represent the business without the knowledge of the other partners—the actions of one partner can bind the entire partnership. If one partner signs a contract on behalf of the partnership, the general partnership and each partner are responsible for that contract. The shared ownership concept that characterizes a business partnership gives it certain distinct advantages and disadvantages.

Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement. In a partnership agreement, the following arrangements, among others, should be spelled out:

1. How the business will be financed.
2. Who will do what work.
3. What happens if a partner dies.
4. What happens if one or both partners want to dissolve the partnership.

It is strongly recommended that an impartial attorney be contacted to write the partnership agreement. Here’s how to find the right attorney.

Business Partnership Advantages

Partnerships are relatively easy to establish.

• With more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater.
• Prospective employees may be attracted to the business if given the incentive to become a partner.
• A partnership may benefit from the combination of complimentary skills of two or more people. There is a wider pool of knowledge, skills and contacts.
• Partnerships can be cost-effective as each partner specializes in certain aspects of their business.
• Partnerships provide moral support and will allow for more creative brainstorming.

Business Partnership Disadvantages

Business partners are jointly and individually liable for the actions of the other partners.

• Profits must be shared with others. You have to decide on how you value each other’s time and skills. What happens if one partner can put in less time due to personal circumstances?
• Since decisions are shared, disagreements can occur. A partnership is for the long term, and expectations and situations can change, which can lead to dramatic and traumatic split ups.
• The partnership may have a limited life; it may end upon the withdrawal or death of a partner.
• A partnership usually has limitations that keep it from becoming a large business.
• You have to consult your partner and negotiate more as you cannot make decisions by yourself. You therefore need to be more flexible.
• A major disadvantage of a partnership is unlimited liability. General partners are liable without limit for all debts contracted and errors made by the partnership. For example, if you own only 1 percent of the partnership and the business fails, you will be called upon to pay 1 percent of the bills and the other partners will be assessed their 99 percent. However, if your partners cannot pay, you may be called upon to pay all the debts even if you must sell off all your possessions to do so. This makes partnerships too risky for most situations. The answer would be a different business structure.

If you Decide on a Business Partnership…

…you should create a “business prenup” that will protect a business if someone leaves.
This “business prenup” should spell out what will happen to your company if a co-owner:

• Wants out of the business
• Wants to retirs
• Goes through personal bankruptcy
• Wants to sell his shares to someone else
• Goes through a divorce
• Passes away

You have two choices: you can have a business attorney write up your partnership agreement or you can do it yourself. If you decide to do it yourself, a good choice is “Business Buyout Agreements”, which walks you through the creation of a legal contract — a sort of “premarital agreement” for your business — that protects everyone’s interests. This document will help ensure a smooth transition following someone’s departure. Business Buyout Agreements: A Step-by-Step Guide for Co-Owners

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There are two decisions every entrepreneur must make fairly early in the life of a startup business.

1. Will you go into business alone or with a partner?
2. What type of legal business organization will you use?

Alone or with a Partner?

Anybody who has been married or divorced certainly knows what a large decision this is. Often, one spends more time with one’s partner than with one’s spouse. Tread carefully into partnerships. Use this listing of partnership advantages and disadvantages in deciding whether you want to be in business alone or with a partner.

If you have decided you don’t want to be in business alone and yet you don’t want a partner, go to the “Recession Proof Business” page to find out how you can leverage your time and efforts without a partner.

The Business Organization You Choose…

…is one of the most important decisions you make. Your decision affects your level of risk, the taxes you pay, and how much accounting help you will need.

The choices for your business organization and a brief description are:

• Sole proprietorship—a sole proprietorship has no separate legal existence from its owner. Liabilities for business debts are not limited to assets of the business. The owner of the business is responsible for all debts incurred by the business. The owner can have the business under his/her name or “doing business as” (DBA). The business, since it is not a separate legal entity, does not file a separate tax return. Accounting for a sole proprietorship is the most simple of legal forms.
• Partnership—a partnership consists of two or more individuals who co-own a business. Although the business is not taxed separately, it must prepare a return which indicates the distribution of partnership profits and losses to the co-owners. The amount of money and time invested by each partner should be written down in a partnership agreement. In a partnership, any partner can be held liable for the entirety of the business’ debts.
• Limited partnership—a limited partnership is similar to a partnership except that there are one or more general partners in addition to one or more limited partners. The general partners are in the same position as partners above, having authority to act as agents of the partnership, having management control over the business, and being liable for the debts of the business. The limited partners, on the other hand, have limited liability, meaning they are only liable to the extent of their investments. Limited partners do not have authority over the management of the business. They invest in the business and receive a share of profits and losses as stated in the partnership agreement.
• Corporation—a corporation is a legal entity separate from the persons that formed it. Owners of a corporation are known as shareholders. The shareholders elect a Board of Directors who hires managers to manage the corporation. In a small corporation the owners, directors and employees may be the same people. Accounting for a corporation can be more complicated than for other forms of organization. The corporation is taxed on its profits and owners may receive dividends which are taxed again.
• “S” Corporation—an “S” corporation is one that has made an election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. Subchapter S corporations do not pay federal taxes. Instead, profits and losses are divided among the corporation’s shareholders who then report them on their income tax returns. “S” corporation owners thus enjoy the advantage of limited liability and profits are not subject to double taxation. However, accounting systems are as complicated as regular corporations. There are certain legal restrictions to your ability to form an “S” corporation. There may also be tax situations where a regular corporation is advantageous to an “S” corporation.
• Limited liability company (LLC)-an LLC is a legal form of business that offers limited liability to its owners and is also a type of corporation. It provides its owners with characteristics of both a corporation (limited liability for it owners) and a partnership or “S” corporation (pass-through income taxation, meaning owners are taxed only at the individual level, not at the company level first). LLCs have become very popular for their flexibility and they are often well suited for a single owner. However, LLCs may have a more difficult time raising capital with an eye toward an Initial Public Offering. (See also the “Money for Starting a Business” section on Venture Capital.) Also, many states levy a franchise tax which a partnership or a sole proprietorship would avoid.

If you have decided to form an LLC or a corporation your question may be, “Which one?” The answer isn’t always clear — but because your choice will affect the legal and tax status of your business, it’s the most important question you’ll need to answer. “LLC or Corporation?” will help you make the right choice with plain-English explanations.
LLC or Corporation: How to Choose the Right Form for Your Business

If you Decide to Incorporate or Form an LLC

Instead of hiring an attorney (which will cost between $1,500-$2,500 on average) or facing the uncertainties of doing it yourself, check out entity formation companies.  They provide the guidance of an attorney without the expensive fees.

Incfile offers entity formation with only the cost of state fees.  Read our detailed review of Incfile.

Incorporate Yourself

Set up a corporation, skip the lawyer, save money! “Incorporate Your Business” lays out everything you need to know about corporate laws and regulations in your state, clearly explaining:

• Why and when to incorporate
• What you need to know about corporate taxation
• Whether to elect S corporation tax status
• How to incorporate an existing business.

Plus, you can save thousands of dollars in attorneys’ fees by incorporating a business yourself — “Incorporate Your Business” guides you through each step. In the end, your business will enjoy a number of advantages. Incorporate Your Business: A Legal Guide to Forming a Corporation in Your State

You Now Know…

There are many decisions which an entrepreneur has to make. Among them are whether to take on a partner and the type of business organization the entrepreneur chooses. You now know:

• The advantages and disadvantages of partnerships.
• The legal business organization you choose needs to be appropriate to your business. There are many choices and this decision has great consequences.
• How to incorporate inexpensively.
• How to incorporate yourself.

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