Many new business owners wonder: Do I need an attorney to form an LLC? The short answer is no, but the long answer — more accurate and more complicated — is maybe.
Simply put, forming an LLC does not require an attorney. Most states allow business owners to form an LLC on their own or with the help of an incorporation service like Incfile. A service like this can save you time while giving you professional help from experienced business incorporation experts who can make sure that your filings are done correctly.
Some attorneys offer LLC formation services as part of their professional services to small business owners, but it is not legally necessary to hire an attorney to help you with this aspect of starting your business. In fact, an attorney's cost to set up an LLC is often more expensive than it would be to use an incorporation service. Basically, don’t feel like you need to shell out hundreds of dollars an hour in attorney fees just to get your business established with your state authorities.
However, there are a variety of circumstances in which it does make sense to hire an attorney to help with issues related to forming or operating your LLC.
When You Need an LLC Attorney: Complicated Business Formation Issues
For many small business owners, forming an LLC is the best choice of legal business entity. LLCs are simple and flexible, and they give you the ability to manage your business as a single member/owner or with additional partners.
However, if you have more complex questions about which business entity is right for you, then it might be worth hiring an attorney to consult about your options and help you make the right choice of business structure. This could be the case if you have foreign investors who want an ownership stake in your LLC, if you want to get venture capital funding or if you want to eventually go public with your company and issue publicly traded stock. An incorporation service like Incfile can help you manage your business filings, meet deadlines and get your business established as a “legal” and “official” business entity. But in some cases, you might still benefit from getting a lawyer's help if there are more complex situations you have to deal with.
LLC Lawyers Can Help With Writing Business Contracts
Contracts are one of the fundamental elements of the business world. A well-written contract can protect your legal rights and ensure that both sides of a business transaction get what they were promised: your business delivers the goods or services, and your customer delivers the cash.
There are many websites promising to offer templates for various business contracts, and in many cases you might be safe enough with those. But if you want to make sure your legal rights, intellectual property, business reputation and other aspects of making money are protected against the worst-case scenarios and liabilities, you may consider hiring an attorney to help craft a standard contract for your business. A customized contract would be specifically tailored to your industry, target market and frequently encountered business issues.
Experienced attorneys are well-versed in the law and can draft an airtight contract that will protect your rights while anticipating (and buttressing against) the possible ways a deal can go sour. Spending a few hundred dollars today on legal services to craft a smartly-written standard contract for your business can potentially help you save many thousands of dollars in the future.
Complex IP Issues
If you hire Incfile as your business incorporation service, they can help you complete a Business Name Search and get trademark protection for your business name. This is a standard level of intellectual property (IP) protection that makes sure your business name is safe to use without getting sued for infringing on an existing copyright. In fact, the Incfile trademark service includes consultation with a trademark attorney.
However, if you have more complex IP questions — such as getting a patent for a new technology, getting a copyright for creative work, protecting your company’s unique trade secrets or otherwise dealing with privileged information that you don't want stolen or duplicated by competitors — then you should be prepared to hire an attorney.
HR Issues: Hiring and Managing Employees
As your small business grows, you might get to the point where you’re ready to start hiring employees. Going from a single-member LLC to a larger company with full-time employees is a major step in terms of legal obligations and regulatory compliance, and this is an occasion where you will probably be better off hiring an attorney to help you navigate the complexities.
For example, when hiring employees, there are a variety of legal issues related to things like:
Complying with state and federal labor laws
Maintaining a safe workplace
Paying into the unemployment insurance system
Managing your company in a fair and equitable manner (to protect yourself from lawsuits for workplace discrimination)
If you’re going to invest thousands of dollars per year in hiring employees, you should be prepared to invest some money up front consulting with an employment attorney who can advise you on how to manage your employees, create an employee handbook, comply with relevant labor laws, etc.
Hiring the Right Lawyer for Your LLC
Hiring lawyers for your LLC is similar to hiring other professionals: Sometimes the best way is to ask around for referrals from your network. If you don’t know any attorneys who have the relevant experience or expertise, consider joining a local business association, or attend some lunch-and-learn seminars where local lawyers are giving presentations. You could also start by reading some relevant articles by various lawyers in legal journals, business publications or law firm websites to get a sense of their style and expertise.
Good lawyers are not cheap, but they’re often worth more than they cost! A smart, efficient, experienced attorney can help you save a lot of money in the long run by anticipating problems before they happen, filling the gaps in your legal protections or crafting customized solutions that fit the unique needs of your business. Don’t be afraid to call upon the services of a trusted attorney to help with the various business and legal issues that might affect your LLC; it will help you stay in compliance with the law, stay in good standing with regulators, and stay ahead of the competition while protecting your rights and income from some of the worst-case scenarios of being in business.
Ben Gran is a freelance writer from Des Moines, Iowa. Ben has written for Fortune 500 companies, the Governor of Iowa (who now serves as U.S. Secretary of Agriculture), the U.S. Secretary of the Navy, and many corporate clients. He writes about entrepreneurship, technology, food and other areas of great personal interest.