Expert Legal Counsel for Your Business
Is a lawyer necessary to start a business?
Starting a business is exciting but can be intimidating. Deciding to work with an attorney can be just as intimidating. The legal, licensing and other regulatory hurdles associated with starting a new business can be overwhelming. You may be facing state and local issues, and even federal requirements depending on the nature of the business. Working with an experienced business attorney is critical to ensuring every aspect of this process is addressed in compliance with Colorado law and all other government entities, rules and regulations that may be relevant to your business.
Compliance
It is critical for your business to remain compliant with all local, state, and any applicable federal laws. Without intimate knowledge of these laws, you may be at greater risk of incurring costly legal penalties associated with noncompliance. An experienced attorney can perform many of these tasks for you, or provide advice and counsel to enable you to do them yourself.
Risk Management
Once your business is created, and all other requirements have been met, there are continued legal risks associated with its management and operations, as every interaction with employees, customers, vendors, the general public and guests (whether invited or not) on your premises can expose you to liability. An experienced business attorney can help you identify and minimize those risks in advance, and deal with them as quickly as possible if they occur. That often includes having someone to advise and represent you in dealing with your own insurance companies.
Contracts and Other Documents
When you start a new business, and through the years you manage your company, you will need to create, negotiate and review a number of different contracts and other legal documents governing relationships with third parties. Having these crafted by an experienced lawyer will ensure they clearly state the roles and expectations of everyone involved; thereby, reducing the risk of potential legal issues down the road.
Creating Your Business Entity
The six basic types of business enterprises are:
- Sole proprietorships
- General Partnerships
- Limited Liability Companies (LLCs), which can be formed by one or more members
- Limited Liability Partnerships (LLPs), which are allowed in Colorado but not all states, and which require at least two partners
- S Corporations
- C Corporations
Of less frequency and greater sophistication and complexity are Limited Partnerships and publicly traded corporations. Limited Partnerships are not the same thing as Limited Liability Partnerships.
Once the decision is made as to the type of entity to create and run your business through, the next step is the actual filing. Many secretaries of state – Colorado’s included – make this a fast, fairly easy and relatively inexpensive process which can be done on-line. Prior to doing so, however, you must ensure that you can secure the rights to the name you wish the business to operate under. Taking steps to do so in advance can help avoid problems later if the name you chose is already registered elsewhere or is confusingly similar to an already existing business. This is done through a series of processes and searches at both the state and federal levels, and on the internet, to be certain you can secure rights to the name.
While the Secretary of State makes the creation fast and simple, the provisions necessary for that are seldom sufficient for the proper operation and existence of the business entity. For instance, what passes for Articles of Incorporation are little more than you answering a short series of questions and then submitting them. However, to have a complete and properly operating corporation, the Articles can and often should address additional issues. This necessitates the early creation of Amended Articles of Incorporation upon a meeting, and with the approval, of all shareholders. Filling out and submitting the Secretary of State information requests gets you a created entity, but does not provide critical information and validation for corporate maintenance, management, rights of shareholders and executives, and liability protection.
Keep in mind, it is often much easier to get into a business than to get out of one. Plan accordingly. A lawyer can help you do that.
Avoiding Selling Securities
Many people look for outside investors to help fund their new business operations, or to allow them to expand those operations in an already existing business. What most do not realize, however, is that under many circumstances, the mere solicitation of investment money can constitute the sale of a “security” which is heavily regulated by both state agencies and the federal Securities and Exchange Commission. Far too many business owners have found themselves facing legal action – which can be civil and at worst criminal – for what are otherwise innocent mistakes due to a lack of knowledge of these laws. These come with potentially severe penalties. The circumstances in which seeking investors is permissible and constitute exceptions to the securities laws are complex. This necessitates the involvement of an experienced attorney.
If you are ever contacted by any agency investigating you for possible violation of this or any law, inform the individual you wish to first speak with your attorney, request that person’s name and contact information (if in-person, ask to see identification), immediately terminate the discussion and call an attorney. If you know what attorney you will be using – another reason to have an ongoing relationship with a lawyer – inform the person of your lawyer’s name, as well as email and phone number, if you know them.
The Independent Contractor Myth
To avoid paying certain taxes and the many time-consuming duties of handling payroll for employees, as well as avoiding liabilities associated with having employees, many business owners believe that they can simply designate many – or all – workers as independent contractors. This is a myth that can result in serious claims, legal action against them, onerous penalties and sanctions. Whether a worker constitutes an employee or contractor is based on a number circumstances and the law of that state or even the federal Department of Labor, depending on the nature and size of the business. In January 2024, the Labor Department declared: “The U.S. Department of Labor (the Department) is modifying Wage and Hour Division regulations to replace its analysis for determining employee or independent contractor classification under the Fair Labor Standards Act (FLSA or Act) with an analysis that is more consistent with judicial precedent and the Act's text and purpose.” For further information see: https://www.federalregister.gov/documents/2024/01/10/2024-00067/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act . Analyzing the laws, regulations and circumstances that dictate what status your workers have requires the assistance of a qualified attorney.
For small businesses, avoiding litigation is key
By being proactively involved with my business clients, over the years I have had success in helping them avoid litigation rather than expend substantial amounts of money in attorney fees, court costs and other associated expenses. Whether plaintiff or defendant, just getting into court is expensive and the discovery process in civil cases, alone, can be financially crippling. After many years as a trial attorney, I now choose to help businesses and business owners and executives create, maintain and manage their operations without the unnecessary consequences of disputes that land them in front of a judge and jury. After 39 years as a lawyer, my hourly rates for these legal services are generally significantly lower than first year attorneys in many larger firms, and even paralegals. My focus with all matters and issues is to save my clients money, their own time and that of employees, and the stress of lawsuits. This even includes arbitration, which is not as inexpensive as many believe. As I no longer seek to represent clients in litigation, I am motivated to do everything possible to see disputes resolved without going to court.
There is value to having a consultative attorney who will not benefit from a lawsuit. Cases that do not allow litigation to be avoided will see me assisting in finding trial counsel, transitioning the matter to that attorney, and offering litigation management so business owners and executives can stay focused on their business operations. In the past, when I would take over all legal matters for different corporations, I typically inherited numerous active litigation cases in addition to the myriad other legal issues that all businesses must always manage. Through a knowledge of the law, experience with the consequences of litigation for all parties, the development of a good conflict resolution strategy with the client, and aggressive implementation of that strategy, actual trials could often be avoided. This also saves businesses money in the appeals that can be expected even when a victory is achieved at trial. The business of businesses is business, not litigation. Clients seldom come out ahead and rarely are glad they went through the years-long process. Litigation is the business of attorneys; that is where they make their money. It is better for any company to manage its business, rather than manage its lawsuits.
Properly Maintaining Your Business
Many problems, to include possible conflicts that may result in litigation, can be avoided through the proper maintenance of your business. Also, failure to properly maintain your limited liability business entity can expose all shareholders, members or partners to personal liability for what would otherwise have merely been a business entity debt or liability. That makes these steps critical for everyone involved with the business. It means regularly attending to legal matters and the creation and maintenance of necessary records. This includes holding annual meetings and maintaining signed minutes of those meetings. Among these are:
- Employee Handbook creation, review and revision
- Annual shareholders’ meetings
- Annual board of directors’ meetings for corporations
- Annual members’ meetings for LLCs
- Annual partners’ meetings for LLPs
Other recommended legal maintenance includes:
- Regular review of all contracts and assurance of compliance by all parties
- Contract review includes maintaining a record and internal notification system of crucial deadlines, such as automatic renewal or non-renewal
- Review and revision of employee and independent contractor agreements
- Annual review of current laws regarding employees’ rights and employer limitations with regard to employees
- At least annual review of all insurance policies
- Review of all policy changes that are issued
- Annual self-audit (or external audit if required) of all records and files on all pending projects, contracts and business operations
- Annual audit of all pending litigation being handled by other attorneys, including review of billing for services and charges for expenses
- Annual filing with the Secretary of State, which includes ensuring current addresses and agent for service of process (required), in addition to other filings that may be necessary from time to time
- Ensuring all licenses and permits are current
Services Provided:
- Employee Handbook review, revision and creation
- Business defense against wrongful termination, discrimination and labor law violation complaints, having successfully defended companies in administrative claims in 27 states, in addition to a nationwide federal Department of Labor action and many federal EEOC cases
- International contracts
- Creation of employee and independent contractor agreements
- Articles of Incorporation for corporations and Articles of Organization for LLCs created, reviewed and amended
- Creation, review and revision of Bylaws for corporations, and Operating Agreements for LLCs
- LLP partnership agreements created, negotiated and revised
- All necessary services for creation, proper organization and management of IRC 501(c) non-profit corporations. My experience has included religious, veterans’, corrections and sex trafficking rescue non-profit organizations
- Creation, review and amendment of Buy/Sell Agreements between shareholders and Management Agreements by and among LLC members
- Contract writing, review, negotiation and amendment
- Negotiations of business transactions
- Negotiations involving issues with government entities and regulatory agencies
- Real estate purchase and sale
- Commercial and residential lease negotiations, drafting, revision and dispute resolution
Law enforcement agency policy and procedure development as well as representation of officers in administrative matters
Liability
Running and owning a business with no protection provided by a limited liability business entity exposes you and your personal assets to liability. Many people engage in businesses thinking that they are average, mundane operations for which there really is no liability exposure. However, there are countless instances when a casual activity can result in a business or owner facing some sort of claim. Just one example is getting into a traffic accident while you or an employee is driving on behalf of the company. Without what is commonly called “corporate shield” protection, you can be personally liable. Therefore, the rule is to be aware that operating a business exposes everyone to liability, often for unexpected reasons. Having the assistance of an attorney is important in creating your business enterprise to ensure you are in the most protected posture possible.
Tax Liabilities
The tax laws governing businesses are highly complex and often confusing. No business owner wants to ever be faced with issues involving the IRS, state or even local tax authorities. An experienced attorney can help you understand the taxes you are required to pay and when, the deductions and reimbursements you may be entitled to, and the best approach for ensuring you remain current with necessary tax filings. Though I am not a tax law specialist, I have helped numerous clients navigate through issues with the IRS and Colorado Department of Revenue, always by working with a long-time associate who is an experienced CPA. If you already have a CPA, it is important that person and your attorney have – or build – an excellent working relationship so they may represent you in the best possible way in all matters.
Business Entity Termination, Dissolution and Winding Up of Affairs
Should you choose to terminate your business entity, or even convert it from one form to another (e.g., from a LLC to a S Corp), there is a legally mandated process that must be undertaken. It is not as simple as just shutting it down or allowing the Secretary of State to invalidate it through a failure to file the annual report, then distributing the business’ money and assets to yourself. This process is more complicated and regulated with a non-profit. If you are contemplating this step with your business entity, you will benefit by involving an attorney early on and working with that person throughout the entire process.