Smart Legal for Small Business

by Stephen D. Bittinger, Attorney at Law

How important is it for a small business to concern about legal formation, proper succession, service contracts, or employee contracts? Unfortunately, I have far too many small business clients who have come to me after the problems have arisen and company-killing litigation is imminent. There are three key areas of business that legal assistance can make all the difference: (1) establishing liability protection through forming the right legal entity; (2) wisely planning the legal mechanics of succession of the business to family or employees; and (3) clear, protected contracting with employees, owners, and clients. To explain, allow me to use a few examples that have come across my desk.

First, I had a good friend who provided a number of small contract-based services to supplement his regular income, and he came to me to inquire as to the possible benefits of incorporating. As we soon discovered, based on the type of services he provided, the liability protection was a substantial benefit. In addition, we found that despite an annual gross revenue was around $20,000.00, there was also an increased financial benefit based on expense reimbursement from the corporation versus tax deduction as a sole proprietor.

Second, the importance of succession planning for a business cannot be understated. Tragically, I represented elderly parents of four children through protected litigation between family members over ownership in a business that financially crippled the company and splintered the family. I have also represented childhood friends who did business on a handshake for a decade that turned to costly litigation because a buy-out agreement was never executed. Although astute legal preparation cannot prevent all hardships in business succession, many foreseeable problems can easily be avoided.

Finally, the importance of clear, conscionable contracts cannot be overstated. Even though I have not quantified the grounds for all of my business litigation cases, the vast majority of them are caused because employees, owners, and clients did not understand and write out their prospective rights in black and white. Last month, I convinced a 100-year-old services corporation to finally spend $500.00 on drafting a standard services contract, after their accountant and I calculated that they had lost in excess of $100,000.00 over the past decade on fee disputes based on oral agreements.

What is the bottom line? Taking the time and spending the money to wisely set up your business can prevent tremendous expense and personal heartache in the future.

For more information contact Stephen Bittinger,




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