Can You Start a Business Without a Lawyer?

Business.com / Starting a Business / Last Modified: February 22, 2017

When starting your business, do you really need to pay for the services of a lawyer, too? Read on to find out!

You’re setting up a business, and there are lots of expenses. Do you really need to pay for the services of a lawyer, too? How hard could starting a business be?

The answer is: Pretty hard. A lawyer ensures that you’re protected, both legally and financially. It’s a bad idea to begin by breaking business laws.

Also, you're required to pay certain taxes, but why shell out more than you have to? You want to be confident that your interactions with customers, the general public, employees and suppliers are on the up-and-up. And if you’re in business with others, you need to formalize the details of that relationship.

Half of new businesses fail within five years of establishment. There are multiple reasons companies collapse, and some are out of their owners’ control. But a lawyer’s expertise can help you avoid many pitfalls. Here’s a sampling of some of the complexities lawyers handle, along with a few tasks that you can manage on your own.

Related Article: Help Is On the Way: 5 Things Small Businesses Should Outsource in 2016

Making a Purchase

If your new venture involves buying an established business, let a lawyer write the purchase agreement. This sets up the payment structure. In addition, you protect yourself against liability and minimize taxes.

A business lawyer also advises you about required licenses or permits. Are there any employee agreements in effect, and how does that impact your purchase? Perhaps most importantly, if the original owner misrepresents an issue or fails to disclose essentials, a lawyer makes certain that you can back out of the deal.

Choosing a Structure

You’re not legally required to have a lawyer set up your business, but the process is extremely complicated, with many layers. Selecting the right structure and organizing it properly gives your business a better chance of succeeding.

Would you function better as a partnership, LP, LLP or corporation? If you choose corporation, do you need a C-corp, S-corp or LLC? If you don’t know the answers to these questions, don’t worry. A business lawyer does.

If multiple owners are involved, their rights and responsibilities need clarification. Financial obligations, profit sharing, individual duties and conflict resolution are just a few concerns that must be spelled out in a contract. A lawyer will be sure to cover all the bases.

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Following the Law

Lawyers make sure businesses don’t start out breaking any laws. This involves knowing local, state and federal guidelines and anticipating potential problems.

For instance, the taxi-alternative Uber came under attack because of its business model. For example, in the company’s founding state of California, a class action suit questioned whether its drivers are, in fact, true employees rather than contractors.

In 2014, Uber was also named in a lawsuit based upon the Americans With Disabilities Act. Uber’s cars can’t usually accommodate wheelchairs. This is just a small sample of the legal issues the company faces worldwide.

Airbnb made a splash on the hospitality scene, connecting hosts and guests. However, it’s unclear where the new entity fits into established laws. One study from the New York State attorney general’s office proposed that over 70 percent of New York City Airbnbs violated laws.

The company requires its proprietors to follow local regulations. This often involves registration, permits and taxation.

Hosts risk fines or other penalties if they don’t comply with their cities’ codes. These don’t specifically address the Airbnb model, so legal advice can help avoid entanglements with municipal governments.

Checking the Details

Certain aspects of setting up a business are often necessary, but less complicated. If you’re trying to conserve resources, you can accomplish these without a lawyer. For example:

What’s in a name? Make sure your business name isn’t already in use by doing an online search through the office of your Secretary of State. Then, make sure the name isn’t registered with the U.S. Patent and Trademark Office.
You’re not home free yet. You still must determine if a name is taken but not trademarked.

This requires local and state database searches. You don’t need a lawyer for this, but a provider who specializes in this service speeds up the process enormously.Take a number. Obtain a Federal Tax Identification Number, or Employer Identification Number (EIN), from the Internal Revenue Service. It’s like a social security number for your business.

Related Article: Overdue & Over You: What Actions Can You Take When a Client Hasn’t Paid?

The IRS uses EINs to follow financial activity. Single owners don’t absolutely need one. If you skip this, though, you’ll have to use your actual social security number.
Bank on it. Open a company bank account. Keep your personal and business finances separate.

You want to show cash flow so you can establish a good credit history. You never know when a business loan might come in handy.

Anyone starting a business is taking a big risk. Hopefully the payoff will be worth it. Using a lawyer gives you stability during the initial setup. Then all you have to do is make the business a success.

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