New Business Legal Expenses

“If law school is so hard to get through, how come there are so many lawyers?” Calvin Trillin

Spend less money earlier

Most people I know have heard one or other joke about lawyers, but dealing with lawyers is no joke. In any new business, legal expenses for the drafting of proper contracts and purchasing an accounting system  for accurate cash flow management, are cheaper than cleaning up a mess later.

It is an unpalatable truth that your business will inevitably seek legal assistance of one description or another. That may be in the form of litigating in court, having contracts drafted, legislative compliance or a myriad of other proactive or reactive matters. Let me assure you of the only guarantee I know of in law – it is expensive!

That said, there are better, and worse legalistic decisions that a business owner can make in relation to their business. Let me share a few basic principles that I have learned along the way and save you some tears and money:

1.The law is expensive, regardless of the nation in which you rub shoulders with it or the comparative reasonableness of your lawyer’s rates. Without taking anything away from those attorneys who charge reasonable rates, sometimes people charge half as much because they need twice as long to get the job done.

This principle takes first place on the list because essentially, those that follow are close relatives, brothers and sisters if you will.

2.Do not litigate “on principle” unless principle 1 above is of no consequence to you. You will be your lawyer’s favourite person for years to come. You will receive birthday cards from them, maybe even flowers when you’re ill, but bear in mind the cynical expression that at the end nobody wins, except the lawyers.

Taking legal action against a debtor (suing) is sometimes the only way to recover what is rightfully due to you. Embarking on litigation is occasionally a necessary business decision and it must be treated with the same cost versus benefit consideration as other business decisions. On the contrary, spending time and money simply to prove a point, is a luxury very few people can afford and visiting your attorney should as a rule not be to heal wounded feelings. See your therapist for that.

Many of us have the experienced the need to prove that we are right and that the other party is wrong. This is both human AND reasonable, but doing so through the legal system might not be the best way to go about it.

3.Spend some money upfront, as soon as your business is able to, on decent contracts and a solid legal foundation for your business; have solid credit granting, terms and conditions of sale, partnership and lease agreements in place. As with divorce, trying to figure out the details after relationships go pear-shaped is a messy affair and almost guarantees that you break this principle, as well as principles 1 and 2 above!

Understand your new business’ legal expenses

All business relationships are best conducted with clarity as to where the parties stand. Doubt creates distrust, and distrust destroys relationships. The better you are able to simplify the issues and avoid potential grey areas, the easier and relatively affordable any ensuing litigation should be.

Starting a new business comes with a host of expenses and, if you are able to, allocate some of your budget to the essential contracts. Many inexperienced businesspeople and those who have not budgeted for initial legal fees are tempted to use contract precedents downloaded for free off the internet. While this may have value in order to obtain some basic understanding of what to consider before visiting your lawyer, you should avoid relying on it too heavily.

Principle 4 below will further illustrate the point; if you are not an electrician or a lawyer, fiddling with the wiring in your home or the contracts in your business, will both likely result in an unpleasant shock.

4.Do not misinterpret this article to suggest that you stay away from lawyers, accountants, business consultants, tax advisors or any other expert in their field. It is a confident individual indeed who professes to have all those skills, and a trusting individual who believes them. I strongly advocate having a support structure that includes experts and professionals in their field, mindful of costs.

You cannot be an expert at everything (despite what your Mom may think) and in the medium to long term, there is no benefit from trying to do it all yourself. Seek out experts with whom you are comfortable working, because you are more likely to take advice from somebody you respect, and resist that of somebody you don’t. There is no point begrudgingly spending your hard-earned cash on an expert that ultimately you do not respect and whose advice you will not heed.

Bearing the above in mind, carefully assess the costs involved where any professional fees are a prospect and weigh them against the potential benefit.

The law is expensive. Let this harsh reality moderate your impulses, but do not let it keep you from seeking justice.