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Utah Business

Local experts highlight eight areas where small businesses benefit from legal counsel.

8 areas where small businesses need legal counsel

This story appears in the June issue of Utah Business. Subscribe

In February 1735, writer, inventor and politician Benjamin Franklin penned an anonymous letter to a newspaper advising fellow Philadelphia residents about fire prevention. 

“An ounce of prevention is worth a pound of cure,” Franklin wrote.

At the time, city fires were common and spread quickly. There wasn’t a dedicated, professional fire brigade. Franklin suggested that preventing a fire is much more effective than stopping it after it’s started.

This is the motto that Jonathan Hafen, shareholder at Utah-based commercial law firm Parr Brown Gee & Loveless, suggests Utah business owners live by—especially when it comes to hiring a business attorney.

“A lot of small business owners focus on getting a business up and running and getting positive cash flow. Those things are important, but you’ll spend a lot less money on lawyers in the long term if you have them involved early in your business,” he says. “You don’t want to wait until you have a problem.”

According to Hafen and other local experts, a good attorney can help you:

1. Choose the right structure for your business.

When you start a business, you need to pick the legal entity that will work best for you in the long run. An attorney can help you think of long-term aspects like tax strategy, liability, investing, scaling and selling. 

For example, if you choose a sole proprietorship and your business gets sued, you will be held personally liable, which means your money and property could be at stake.

“Picking the structure is either going to set up a business for success or failure. It’s important to choose one that makes sense,” Hafen says.

2. Create a solid ownership agreement.

During Jeff Erickson’s extensive career spent founding, running and funding companies, he’s seen a common mistake: not getting professional legal help while setting up an ownership agreement. 

Erickson, the founder of Founders N’ Funders, explains that without a proper ownership agreement, there can be voting stalemates, selling disputes and other business control issues. 

When Erickson sold his own company, issues and disputes arose that he couldn’t have foreseen. Thankfully, because an attorney helped them create a well-defined ownership agreement, he and his fellow owners had something to fall back on.

Now, as an investor, he carefully examines a company’s operating agreement to make sure the company has things set up properly before he decides to invest.

“Everybody’s an optimist. I’m an optimist,” Hafen says. “A lawyer can help you think through what happens if things turn out to not be so great.”

Local experts highlight eight areas where small businesses benefit from legal counsel.
Photo courtesy of Adobe Stock

3. Set up proper IP protocol.

Before registering your trademark, you should search to ensure that your idea isn’t something someone else has already thought of. If you take someone else’s idea, even by accident, you risk getting sued.

Once you’ve done that, an attorney can help you determine the best ways to protect your intellectual property. They can help you register a trademark or apply for a patent.

4. Choose the right types of insurance.

One of the first questions Hafen asks his clients is: What insurance policies do you have?

There are seemingly infinite types of business insurance, like liability, property, worker’s compensation and more. An attorney and an insurance agent can help you figure out which types of insurance and policies would be the most beneficial for your business.

“You want to make sure you have a strategy with insurance so that you can manage and fund your defense in most kinds of litigation,” Hafen says.

5. Set up proper cybersecurity and threat response.

The news is full of businesses dealing with cybersecurity and data breaches. Local experts recommend you work with an attorney and other experts to make sure that you have the proper protection, as well as a protocol and threat response if a breach occurs.

“You want to find an attorney that’s right for who you are. Seek out business mentors and get a recommendation.”

6. Review and draft contracts carefully.

When business owners are just getting started, they are excited to get cash flowing and don’t always take time to review the contracts, Erickson explains. Contracts can be notoriously tricky. An attorney can help you read between the lines and make sure you know what you’re signing up for.

You should also be careful drafting contracts. Contracts from the internet aren’t always reliable or specific to your company, and if there are challenges, you might not have anywhere to turn.

“You can avoid a lot of complicated, expensive litigation with a really clear agreement where you know what every provision means,” Hafen says.

7. Maintain a good employee culture and climate.

Employment disputes can take up a lot of time and money. A good lawyer can help companies establish best employee practices, like communications policies, harassment responses, cultural training guides and handbooks.

“You should think about the internal ‘what ifs’ down the road and set up a system to have a healthy culture and relationship with your employees,” Hafen says.

8. Establish regulatory compliance.

Businesses have to meet state and federal standards in almost every department. An attorney can help make sure you’re meeting all of these regulations, as well as help you understand them so you can run your business in compliance.

To find your perfect attorney, the experts interviewed recommend asking other business owners you respect for referrals.

“You want to find an attorney that’s right for who you are. Seek out business mentors and get a recommendation,” Hafen says.

Erickson advises finding an experienced lawyer who specializes in the type of business law you need help with, even hiring different attorneys for different needs as your business grows.

If you have a tight budget, Erickson recommends that you talk with attorneys and disclose your budget from the beginning.

“You want to set expectations upfront. A lot of attorneys will be OK with that, and you don’t want to wait until you get a bill for thousands more than you were expecting,” he says. 

Jenny Rollins is an award-winning writer, editor, and content producer with a decade of experience. Her work has been featured in Boston Magazine, Harvard Business Review, Deseret News, and Her series on the mental toll frontline healthcare workers experienced during the COVID-19 pandemic won first place for series from both the Utah Society of Professional Journalists and the Rockies Regional Society of Professional Journalists. Jenny lives in Orem with her husband, son and dog. She spends her free time shopping at her local independent bookstores, talking about dinosaurs with her toddler and listening to an absurd number of audiobooks.