There are two kinds of lawyers in popular culture: the reserved, bookish law nerd who builds impressive legal arguments but struggles to talk to people, and the larger than life trial attorney who doesn’t struggle with anything except making time for their family. In 2020, there’s another kind of lawyer - the start-up attorney, who needs to intimately understand the needs of their entrepreneur clients and go with the flow in an industry in flux. If you want to get - and keep - your small business clients, you need to do these four things:
Embrace The Business. A great lawyer will have a deep understanding of their client’s business venture - the industry, the product, the employees, the marketing strategy. The legal advice you will give is tied up in the type of business your client is starting (or growing), so you want to make sure you are knowledgeable about not only the product, but the entrepreneur. Listen to clients’ ideas and interrogate your own skills - what areas of law do you already know, and what do you need to do more research about? What are the biggest legal risks now, and down the road? What are the client’s pain points, and how can you address them? Entrepreneurs and their lawyers sometimes conflict - see if you can figure out ahead of time where your risk-averse nature is going to butt up against their big dreams, and strategize in advance to minimize that conflict.
Don’t Lend Money. So you followed the advice above and embraced the business - and now you want to invest in it. This can be fine if the terms are reasonable, the consent is informed, and everything is in writing - but in general, it’s better to keep your finances far away from your client’s business. Where money is involved, disputes are often soon to follow.
Understand Entity Selection. Start-ups may be small businesses, but they are run by people with big dreams. You want to make sure you set them up from the start with a corporate structure that aligns with their long-term goals, so make sure you really understand the pros and cons of each type of corporate entity. Partnerships will provide the owners with the least liability protection but have some tax benefits. This may be particularly appropriate when your clients are family members - family partnerships are frequently used to protect and transfer wealth between generations. On the other side of the scale, if you are working with a business that is scaling up fast, C Corps may be the appropriate entity - but the owner then faces double taxation. S Corp owners don’t - the gains and losses from income taxes pass through to the various owners. In the middle, Limited Liability Companies (LLCs) are taxed more like a partnership by default, but may elect to be taxed like an S Corp, which can have tax advantages, especially under the Tax Cuts & Jobs Act. LLCs asking for S Corp treatment have to pay taxes on the wages provided every quarter: if there is profit, they pay taxes on net income, and there are none of the unknown variables that can pop up with partnership revenue.
Remember Where You Are. By this, we mean geographically. Companies all need to comply with federal, state, and municipal laws regarding the minimum wage (which can vary across regions in the same state), employee anti-discrimination protections, paid leave policies, and more. Recent legislative trends have seen states and municipalities providing greatly increased employee protections than the federal government, and these are evolving rapidly.
The bottom line is this: clients appreciate you being invested in their dream. Be curious about their ambition, be nosy about their needs, and be aware of the kind of business your client wants to be.