Disclosure: This post may contain affiliate links, meaning we get a commission if you decide to make a purchase through our links, at no cost to you. Please read our disclosure for more info.
Last Updated on June 13, 2014 by Work In My Pajamas
Sometimes when operating a small business, it is clear when you should call an attorney, such as when you have been served with a lawsuit or you are facing an IRS audit. However, there are some situations that many business people believe they can handle on their own where the advice of an attorney could be extremely beneficial.
Government Investigations
If a local, state or federal government entity contacts your business regarding an investigation, even if your company is not part of the investigation but could provide insight into a crime, it is critical to contact an attorney. When an agency conducts an investigation, they review anything that may pertain to the crime. This includes the financial information of other companies that do business with the one being investigated. According to The Coulter Law Group, an attorney protects information that does not pertain to the investigation which could lead to problems for your company in the future.
Special Allocations
Any changes made to an LLC or partnership agreement should be reviewed by an attorney, especially if the company plans to create special allocations for profits. A special allocation is when a company splits profits and losses in a way that does not match the percentage interests of the owners. For example, if one partner is a 60 percent owner of the business and the agreement will allow the partners to share profits and losses equally, an attorney should review the agreement before either party signs. One reason this needs to be reviewed carefully is that the IRS looks closely at special allocations. They want to confirm that the company is not attempting to avoid paying the proper amount of taxes, such as allocating business losses to a partner in a higher tax bracket. The same is true should the partners decide to contribute appreciated property to the partnership or LLC, as this also has tax implications.
Environmental Issues
When an environmental issue, such as ground contamination, is discovered, it is very important to contact an attorney. This is true even if the contamination was not caused by your company. For example, a retail store may open in a building that was a gas station more than 40 years prior. Because environmental laws were much less strict when the gas station closed, there could still be underground tanks or chemicals below the soil. If this is discovered, there could be issues that face the retail store even though they had nothing to do with the chemicals in their soil. Therefore, discussing the matter with an attorney is the best method for protecting the rights of the new company.
There are many more reasons why a business should confer with an attorney, including employee issues or negotiating the sale of the business. Even if the issue seems minor, a qualified business attorney can provide invaluable advice that can prevent the problem from becoming worse.
