7 Reasons Why Every Small Business Should Have Outside General Counsel

Let’s face it, good legal advice isn’t always cheap. Every business would love to have their own in-house lawyer that can answer every question, revise every contract, and respond to every subpoena or lawsuit – and do so without charging by the hour. But an in-house lawyer or general counsel is not economically feasible for most small businesses. So, what is a small business to do to get competent, responsive, and cost-effective legal advice? Establish a relationship with a lawyer or law firm as “outside general counsel” – and here are 7 reasons why.

1. You have a designated person to call if and when you need legal help. Imagine that your small business gets a new business opportunity with a publicly traded company – a contract that could mean millions of dollars and transform your business – but the company sent you their “standard” 10-page terms and conditions (single spaced, double sided, 6-point font) and wants a response in 24 hours. Who are you going to call? You could spend days trying to get a referral to a good lawyer, getting in touch with them, running conflict checks, signing engagement letters, depositing a retainer, etc. Even more worrisome, you are asking a lawyer to respond to a potentially business altering contract when they know nothing about your business.
2. You know what and how the lawyer charges. A moment of urgency is not a favorable time to negotiate hourly rates or alternative fee arrangements. Establishing a relationship with a lawyer before you need the help will allow you that time to discuss fee arrangements in advance.
3. You have access to the lawyer’s network. Unique or niche legal matters often require expertise outside the scope of a corporate generalist (e.g., admiralty or maritime law, immigration, environmental law, etc.) and there may only be a handful of lawyers in the city or state with the necessary knowledge and skillset to handle your matter. If you have a relationship with an outside general counsel, you have access to that lawyer and firm’s entire network and benefit from streamlined legal services.
4. You have someone to call in an emergency. I cannot tell you how many times I have been called because a client’s key employee got in legal trouble (e.g., DUI), got in an accident, had a family member get in trouble, had a son/daughter get in trouble at school, etc. Being able to immediately pick up the phone and get help for your key employee not only helps your business stay open and operating but also creates loyalty among employees.
5. You have someone to help you abide by all the “corporate formalities” of operating in a limited liability entity (e.g., LLC, corporation, limited liability partnership, etc.). One of the key benefits of operating a business in an LLC or corporation (or other similar entity) is the limited liability protection – creditors of the business cannot get to your personal assets or the assets of members/shareholders. Sometimes creditors try to “pierce the veil” of liability protection and get to the assets of members/shareholders. While it is a difficult task, one of the key elements of “piercing the veil” is whether the entity abided by all the corporate formalities (e.g., corporate minutes, annual meetings, corporate records, etc.). While these things often seem trivial in small businesses, they can be very important in defending against creditors trying to pierce the veil and assert personal liability for the business debts.
6. So we can help you look forward and plan for the future. Is the business going to need financing or a loan? Are you looking to sell the business or acquire other businesses? What is your succession plan for the business? What happens to the business if you get “hit by the proverbial bus”? Your outside general counsel has been through all these types of transactions in the past – we know what banks and investors expect, we know what private equity buyers expect, we have done succession planning – and can help prepare you for and guide you through these transactions more smoothly and cost effectively.
7. Most importantly, so you get advice from someone that knows you and your business. Business owners are people and lawyers are people too – we all have our own set of expectations and understandings. The middle of an urgent, “bet-the-company” legal matter is not the right time to find out if you and your lawyer have the same set of expectations and understandings. I have been given the same exact instructions from two different clients and yet they wanted very different things. Had I not known the clients ahead of time and understood their individual set of expectations and understandings, I would have had very unhappy clients. Moreover, the best advice you will get from a lawyer comes from a lawyer that not only knows and understands you as a person, but also your business. There are business implications in every legal decision and asking a lawyer to give legal advice in a vacuum (without an understanding of the business and the business owner) will lead to less efficient, more costly, and potentially harmful legal advice.

For more information or to seek counsel from our business & corporate law group, please reach out to request a consultation or call us at 216-696-1422.