A question many people ask during startup – When do I need an attorney? Can I start without one to save money and get one later when something comes up?
Business Type and Need for an Attorney
Whether you need an attorney to start your business depends in large part on what legal type of business you are starting. The simpler the business, the less need for an attorney. Let’s look at the various business legal types:
Sole proprietorship – This business type doesn’t require you to register with a state. You probably don’t need an attorney to start this business type, since no specific paperwork is required, outside of any local business licenses.
Partnership or LLC – These business types must register with a state. Other documents must be prepared, like a partnership agreement or LLC operating agreement. You may be able to register online with your state or use an online service to register your business. If your business is at all complicate, it’s a good idea to use an attorney to help you start these business types.
Corporation or S Corporation – These businesses must register with a state, must prepare bylaws and other documents, and have a more complicated ownership structure. You almost certainly need to use an attorney to help you start these business types. (Note: The S corporation starts as a corporation then elects S corporation status.)
Comments from Business Owners on Need for an Attorney
I have received comments from two different groups on the question of whether you need an attorney to help you with business startup. One group says you absolutely need an attorney; the other group says you can do it yourself. Pay attention to the legal types of businesses mentioned in these comments.
The reasons most often cited for needing an attorney are:
- You need help navigating the many forms and requirements of legal documents involved with startup (like incorporation documents)
- Even though having an attorney is expensive, you know that startup is being done right. As Paige Stanley said, “Every business, albeit an LLC, LLP, or corporation, faces issues requiring an attorney. The money you spend on experience will save you time, hassle, and money in the long run.”
- Having an attorney frees you to focus on other aspects of startup, so you don’t have to spend time learning about the legal processes. April Meese said it best: “You don’t know what you don’t know.”
- An attorney can help with specific tasks, like trademarking your name, reviewing lease documents, discussing potential legal structures, preparing incorporation forms.
- Online legal form providers don’t do it right. Attorney Susan Dawson says, “It is often more costly to undo what clients have done on their own using those services than if they had hired me to establish their business in the first place.”
Responses against hiring an attorney to help with the tasks involved in business startup focused on these issues:
- The forms are simpler than you might think. For example, filing Articles of Organization for an LLC is a very simple task that you can complete yourself.
- You can save a lot of money. Julie Eaton has formed many companies, using online services. She says, “not only did I save TONS of money but I also learned more than I could have by hiring an attorney.”
- You can find free help. State and local governments can help you with forms, there are business incubation services that provide assistance, and organizations like SCORE can lead you through the process.
- Forms are available on the Internet. Several responders mentioned using online forms, like those from BizFilings and LegalZoom.
- Save your money for more important purposes. Seth Mendelsohn, owner of Simply Boulder Foods, created his company without legal help. He says he didn’t have partners and didn’t need an operating agreement; “an attorney would have tied up much needed money for growth.”