Avoid the Horror Stories: Get an Attorney

If you haven’t yet heard a horror story about a small business with a legal mess, just wait. Eventually, you will. You can’t spend time around small business without hearing one.

Like the time Carl went into business with 3 other partners. One partner was supposed to contribute $1 million to the business, which was his only contribution to the business. The other partners were going to be working in the business. However, months in, the $1 million dollars hadn’t shown up. The partner backed out of his commitment, but he didn’t back out of the partnership. He owned 25%.

The business was extremely capital intensive. Without the money, it was impossible for the company to keep up with demand. Ultimately, the business had to sell for pennies on the dollar (or risk losing it all).

What was worse, the partner who didn’t contribute the funds, took the others to court to try and sabotage the sale, ultimately costing the business over $60,000 in attorney’s fees and a $100,000 buy-out.

By the time the business sold, the partners paid off the creditors, leaving nothing for them, after working tirelessly for 2 years. The other partner, put $0 in, worked zero hours in the business, and walked away with $100,000. All because the partners didn’t have an attorney review the documents to ensure they were protected.

As you enter any business relationship, whether with a vendor, a customer, or a partner, you should have an attorney review. It’s important that a business have an attorney to look after its best interest, as well as every partner having their own attorney to look after theirs.

Don’t trust what your vendor, customer, or partner is telling you. Get an attorney. If you bring them in at the start, it’s going to cost you a lot less than it will cost you to clean up a big mess down the road.