|Written By: Christopher B. Lobb
Law Firm of Young, Owens & Wright
|Originally Published in the July 1987
issue of The Outfitter Magazine.
Choosing a lawyer is similar to selecting a business partner. It is essential that you feel comfortable with the person and confident the lawyer is committed to providing the best possible service. For those involved in small businesses, either as sole proprietors, in partnerships or who operate through a private corporation, their lawyer and accountant often act as their only business advisers so the choice is an important one.
Size of Firm
Although the size of a firm is no indication of the quality or the cost effectiveness of its work, you should look for a firm which is large enough to have specialists in corporate law, real estate and litigation. A corporate lawyer is able to advise on corporate and taxation matters as well as recent developments in employment law. As your business expands, your revenue and number of employees will increase and the effect of taxation and employment legislation becomes more important. It is necessary to ask if the firm has knowledge of wrongful dismissal actions in recent years and the enforcement of employment standards legislation in various provinces makes employment law an area of increasing importance to an individual involved in small business.
Most businesses lease premises or own property which is used as their head office. For this reason, it is advantageous to have access to a lawyer experienced in real estate matters. Litigation lawyers are not needed on a regular basis but it is important to be able to draw on the experience of a specialist to assist in collection matters or when litigation is threatened or anticipated. In such a situation, timely advice may prevent expensive litigation or settlement negotiations.
Type of Services
The basic services of a law firm include the incorporation and organization of new businesses, the transfer of assets to the new businesses, the acquisition of the assets or shares of other businesses, employment matters, commercial and residential real estate leases and transactions, collection matters, dealing with anticipated negotiations or litigation and the drafting of wills.
One-third of the members of the Canadian Federation of Independent Business are not incorporated. An example of the type of service a lawyer will provide for an individual in this group is to discuss the benefits of incorporation such as lower tax rates and protection from unsecured creditors. Where the decision is made not to incorporate, an individual can still obtain valuable advice on matters as the form of contract to use with customers and protecting personal assets from trade creditors.
Another service which your lawyer is able to provide is advice on financing. Where debt-financing is involved, a lawyer can tell you what security a lender will require and review the documents to ensure they reflect the agreement. Your lawyer can also direct you to sources of equity and/or venture capital for smaller firms by setting up corporations specifically to invest in the small business sector. The Programs go by different names - in Alberta it’s the Small Business Equity Program; in Ontario, Small Business Development Corporations - but the basic model is the same and the goal is identical: to provide more money for business investment.
A law firm that has a client’s interest uppermost in its mind will initiate contact with the client on matters of particular concern and new developments which may affect the client. Routine matters include annual resolutions of a corporation while more general developments include matters such as new and proposed legislation. Recent examples include the Family Law Act in Ontario and the proposed shift in the tax burden from personal to corporate taxes announced by federal Finance Minister Michael Wilson in July, 1986.
Individuals come to law firms with different expectations. Some know exactly what they wish to do and see their lawyers as facilitators of these transactions. Others look upon their lawyers and accountants as business advisers similar to members of board directors.
Those in this latter group should look for a lawyer who has a business background or an understanding of how business operates. Such as a lawyer, with the assistance of an accountant, is able to give practical business advice as well as inform the client fully of all legal considerations and make appropriate recommendations.
It is also important for the lawyer to have working knowledge of the taxation laws or ready access to a tax adviser. When a client is contemplating a particular transaction, a lawyer may advise on the best structure for the deal to minimize the amount of taxes payable. Such advice includes the decision whether to operate as a sole proprietorship, partnership or corporation, the allocation of the purchase price to the goodwill or depreciable assets on such acquisitions or whether revenue of a corporation should be distributed in salary or dividends.
When negotiating a transaction, it is advisable to have your lawyer assist in or review the negotiations before a final agreement is reached. A lawyer who is fully informed of a client’s concerns reflected in the documents of the transaction. A lawyer’s role in such a situation is to achieve the long-term goals of protecting the client’s interests and providing adequate security.
The most important aspect of choosing a lawyer is to feel that your lawyer will provide the best service. There must be trust in the personal judgment as well as confidence in the business advice of your lawyer. These qualities must be combined with accessibility to your lawyer at all times.
A lawyer must know a client’s business almost as well as the client, anticipate immediate and future legal requirements, initiate contact with the client and fulfill the needs of the business. Your lawyer must advise against pursuing certain avenues which would prove fruitless as well as provide work on a cost effective basis.
The desire to be accessible is essential. Telephone calls should be returned on the same day and work should be done on a timetable designed to suit the client, not the lawyer.
If cost is a determining factor in your choice of a lawyer, this should be addressed at the outset. A total fee, not including disbursements, may be quoted for routine matters such as incorporation or a residential real estate purchase. For more complex matters, however, it is often difficult, and may in fact be misleading to estimate legal fees. In such a situation it is appropriate to determine the hourly rate of the lawyer for the transaction and an estimation of the time involved. These would serve as rough guidelines for cost of the transaction and they should be reviewed as the matter progresses. Once a transaction is completed, the client should receive a detailed account of the services preformed. The account is often adjusted to reflect the outcome of the transaction as a means of assessing the value of the hours spent.
Making the Right Choice
One of the best ways to choose a lawyer is on the recommendation of someone who uses that lawyer. Another method is to ask for a list of references from a lawyer you are considering retaining. Consult those references thoroughly before entrusting your legal affairs to that lawyer.
The choice of a lawyer is your responsibility and should be approached in the same manner as other business decisions. If you are considering different lawyers, ask them a sufficient number of questions to enable you to assess the strengths and weaknesses of each and to make an informed decision.
After the Choice is Made
When you choose a lawyer, you do not choose someone to make decisions for you. You have retained someone who will advise you on all of the legal implications of your actions. Ask as many questions as necessary to satisfy yourself that you have sufficient information to reach a decision and challenge the advice of your lawyer when you do not agree with it.
Whether you proceed with a particular course of action is a business decision. Your lawyer’s advice and recommendations are based on legal considerations. However, your decision will be based on a greater number of factors. You know your business and are in the best position to assess the impact of a course of action on your customers, suppliers, employees and on your future business prospects.
Potential litigation will illustrate this point. Based upon the strengths and weaknesses of a particular case, a litigation lawyer will advise you to either commence or defend a legal proceeding, whichever is applicable, or attempt to settle the matter out of court. You must weight this advice against such considerations as the time which you and your employees must devote to such a legal proceeding to the detriment of your daily responsibilities and the effect the lawsuit will have upon others with whom you do business. Such considerations together with the advice of your lawyer will all be factors which go into your decision.
When choosing a lawyer or weighing the advice of one, the decision is the client’s responsibility and must be made only after all the factors have been considered.