3 minute read
Expert Legal Advice
Whether a business is small or large and selling goods or providing services, at some point every business is likely to run into a legal question. While many large corporations retain a business attorney or might even have general counsel on staff, many small to medium businesses don’t.
Prairie Business asked business legal experts to disclose their top tips that companies of all sizes need to know. Here are the eight pointers they shared, in no particular order:
By Kayla Prasek
Attorneys on Retainer
“Established businesses often make the mistake of failing to retain a business attorney until they really need one,” says Brian W. Boppre, attorney and founder of Boppre Law Firm in Minot, North Dakota. “It is useful to have an attorney on retainer who understands and is familiar with the business so they can easily and quickly advise on important matters.”
Not only can a business attorney provide advice and assistance in times of crises, but an attorney can help a business owner navigate all legal questions affecting all areas of business.
Separate Business Entities
Those thinking about starting a business should consider setting up a separate business entity to protect themselves, Boppre says. “Many businesses fail to set up a separate business entity, such as an LLC (limited liability corporation), when establishing a business,” he says. “With an LLC, the owner is protected as an individual against creditors and lawsuits against the business. This could help prevent both business and personal funds from being wiped out in the event of trouble.”
Signing a Contract
“Seek legal assistance before signing a contract,” says Stephanie Asheim, attorney at Vogel Law Firm in Fargo. Asheim says that while some executives will hesitate to incur the upfront cost of paying a lawyer to review a contract, the benefits outweigh that cost. “The costs when something goes wrong or litigation results often far exceed the cost of having a lawyer review and explain the contract and to negotiate more favorable terms to the business,” Asheim says. Key terms to be cautious of in contracts include those relating to payment, termination, indemnification, remedies and, in the case of a small business, any required personal guarantee, she says.
Strong Legal Agreements
“Even the most successful business can be undermined by poor legal arrangements,” says Scott Swier, founder and president of Swier Law Firm in Sioux Falls, South Dakota. “Failing to plan for the possibility of lawsuits or other problems may come back to bite you at the worst possible time.”
Swier says avoiding loose language in contracts and loose understandings can help protect a business. “Doing business with friends, family and long-time business partners is a common practice for business owners,” Swier says. “However, the strength of these relationships should not prevent you from signing detailed yet flexible legal agreements.” At the end of the day, business owners need to have the proper protections in place for themselves and their businesses.
Buy-Sell Agreements
A business attorney isn’t just there to answer legal questions and assist with business contracts. He or she can also provide advice for business owners trying to exit a business. “Many businesspeople seek counsel on choosing the proper entity structure for conducting business — for example, setting up a limited liability company, corporation or partnership,” says Darrell Larson, attorney at Camrud, Maddock, Olson & Larson in Grand Forks. “An often overlooked initial consideration is the mechanism by which the principals will sever their relationship and the business will continue. A buy-sell agreement provides that mechanism will sever.”
Larson says a business’s owners should address these issues before their relationship has soured and one or more want to exit ownership of the business. “Agree on how to get out when you get in,” Larson says.
Cybersecurity
Businesses of all sizes must be aware of cybersecurity threats as well as ways to minimize those risks and allocate the responsibility in the event of an incident or breach, Asheim says. “A business needs security safeguards, policies and procedures for employees and third parties able to access the computer systems, and a monitoring system,” she says. Insurance can also play a part in minimizing out-of-pocket costs relating to a breach. A general commercial liability policy will often not cover a cybersecurity incident and related losses. Written contracts with third parties can also allocate responsibilities relating to cybersecurity and any related losses, Asheim says.
Business Succession Planning
A business attorney also can help a business owner nearing retirement prepare for the next step. “Business succession planning is often overlooked but is essential to facilitate a smooth transition of business ownership in conformity with the owner’s wishes utilizing all estate, gift and income tax savings methods legally available,” says Tim Dittus, attorney at Camrud, Maddock, Olson & Larson.
A business succession plan should include the business owner’s estate planning — especially in family-owned businesses — buysell agreements and a myriad of other items and issues to which competent, experienced professionals are essential, says Russ Melland, attorney at Camrud, Maddock, Olson & Larson. “Plan early to make the transition the best for all,” he says.
Stay Out of Court
“The costs of litigation, which drains management attention, time and energy, is far higher than many businesses can afford,” Swier says. Swier says business owners should consider including arbitration clauses in their contracts, as well as considering other alternatives before actually going to court.
“Whether you ask your attorney for help with organizational paperwork, tax matters, intellectual property, or a customer who slips and falls on your premises, having an experienced expert in your corner nips problems in the bud and helps you avoid missteps that may later prove costly,” Swier says. PB
