02 / 22 / 2016

Friend of the Devil: Why Small Businesses Need Quality Relationships with Legal Counsel

“Please allow me to introduce myself” is the classic opening for the Rolling Stone’s anthem, Sympathy for the Devil. . . . and, some would argue, for many law firms. While no one will say their lawyers are really the devil – at least we hope not – lawyers are a necessary evil in the long term strategy of an aggressively growing business. Most growing businesses need experienced business litigators to serve as a sword and a shield for their business. As a business evolves from startup to a star player in its market, the collaboration between a business’ management team and their counsel is necessary. Everything from knowing the various partnership and management interests and protecting newly developed products or services, to litigating threats to the business, a trusted business lawyer serves as a sword and a shield to their business clients.

Maintaining a long-term relationship helps the law firm understand the various interests at play in the business.  For example, is the business being managed by the founders, by officers or managers, or does it even have a formal management hierarchy?  Most closely held businesses operate somewhere between these three prongs.  Business attorneys can help structure the operational protocols of the business to allow for dynamic management, allow the business to employ more formal decision-making strategies on larger transactions, or allow more of a scrum management on working up projects for the business’ customers.  A good corporate lawyer should also understand any new players involved in the business.  As a business grows, it usually brings in more diverse talent.  Sometimes, new talent will want to trade a higher salary for a lower pay scale with equity.  While this may be an incentive for some businesses, it will be catastrophic if the trade for equity also requires changes to how the business is managed, expenses booked or profits distributed.  Short terms benefits can mask the long-term detriment to the business.  Having counsel evaluate the proposed joinder of the outside party will, at the least, serve as a sounding board, and at most, prevent the existing partners / shareholders from giving up rights and benefits that will hamstring the business.

Many of the businesses that we, at the Vethan Law Firm, P.C. represent, are involved in cutting edge projects, in creating new products, or refining a specialized service.  Important decisions inevitably involve protection of intellectual property when a business has a product or service which gives it a competitive edge against its competitors.  While everyone has heard of patents, trademarks and copyrights, trade secrets and trade dress are also hugely valuable business assets.  A business lawyer typically advises his or her client on how and when to protect the keys to the kingdom.  A business lawyer should know how the business has been developing its proprietary information and deliverables.  Does it have an R & D department, or do inventions result as a solution to problems in the field?  Does the business have protocols built in to claim ownership to inventions by its employees and contractors?  If ownership of valuable and proprietary information ever becomes an issue, the business lawyer should be familiar with the steps the business took to protect that information, and should be involved in the processes employed to ensure a competitor does not illegally misappropriate valuable information.

When faced with litigation, whether on a non-compete, breach of fiduciary duty against a former manager or partner of the business, the business lawyer must understand and articulate, in very short order, what harm the former employee, manager or partner’s conduct may have on the business.  If quick action is required in court or in arbitration, the business lawyer will already have full knowledge of the business, the personalities at the company, and understand the historic strengths and weaknesses of his or her client’s position.  A business attorney can craft arguments and trial strategy in response to the information known about the client.

Whether a business may merely needs a second set of eyes to review a deal, or needs gladiator to be its champion in court or arbitration, having a long term relationship with a competent and trusted business attorney is more than a convenience.  It may be imperative to the continued viability and operation of the business.

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