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When you'll need that attorney

December 06, 2006|Karen E. Klein | Special to The Times

Question: I started my own business a couple of years ago and don't have an attorney. Do I need one?

Answer: Although having a relationship with a business attorney is a good idea in general, there is usually some crucial point or event experienced by a business that prompts the hiring of an attorney.

The most obvious is a lawsuit. Even when there is an insurance carrier that is obligated to defend you, consult with a lawyer to ensure that your interests -- not just the insurer's -- are protected, Los Angeles business lawyer C. Dickinson Hill said.

He suggests that you consult with an attorney if your business has valuable intellectual property such as inventions, trademarks or copyrights.

Other reasons to call a lawyer include any change in ownership or the accumulation of potentially large or uninsurable liability risks that make it worthwhile for you to form a corporation or limited liability company.

Whether you need to consult an attorney for other business events depends on how important they are, Hill said. For instance, if you're entering into a large contract, the risk of proceeding without an attorney may justify the cost of a legal review.

"Examples are a property lease, license, loan, purchase, employment or consulting agreement," Hill said. "Often these are presented as 'standard forms' and the business owner does not understand that they are negotiable" until an attorney looks them over.

Another, less obvious, reason to hire an attorney is to identify hidden legal problems that could hurt your business. Hill said it was a good idea to get periodic legal reviews -- similar to regular medical checkups for individuals -- particularly for small-business owners who may have formed a business entity without a lawyer.

"Typically, the entity was properly created, but there is no oversight of the process that follows," he said. "Improper or ineffective agreements, tax elections or stock sales are quite common in these cases and may create liabilities that go unrecognized until there is a tax audit or dispute; then it may be too late to correct them."

Preparing to merge

three real estate firms

Q: Two real estate colleagues and I plan to merge our companies. What kind of research should I be doing? Can you advise us of potential pitfalls?

A: Merging three companies is a complex process that requires substantial planning to ensure a friendly and productive transition for your clients, prospects, employees and suppliers.

The merger will certainly give you economies of scale and reduce duplicate administrative employees. But structuring the transaction will involve choosing accounting methods, recognizing tax considerations, figuring out payment methods and more, said Mike Maiman, senior managing partner of the MKL Acquisitions division of Tarzana-based consulting firm Maiman Keller & Lock.

"There will be a learning curve and significant changes in operations that will need to be handled by all employees and owners alike to be successful," Maiman said.

Your priority should be considering how your employees will look at this new entity. Will they be concerned that their livelihood is threatened? Decide who and what is most important to your new company and plan to protect your key employees. It may help, Maiman said, to give them "ownership of this new entity, meaning they must sign off with you on this merger and be ready to be a part of your new company."

The idea in a merger is to make money but to do it in a way that allows you, a partner and contributor of one of the companies, to be happy in the outcome.

"The success of the merged firms may depend on the steps you take initially to identify and retain your company's unique culture," Maiman said.

Got a question about running or starting a small enterprise? E-mail it to karen.e.klein@la times.com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012

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