Wait, Do I Need An Attorney?

EforAll
EforAll
Nov 6 · 3 min read

By Patrick Cassidy of Cape Cod on the Fly

This is a part of a series of posts written by entrepreneurs of the Fall 2019 Business Accelerator cohort for EforAll Cape Cod.

Every small business owner will ask themselves the same question at one point: Wait, do I need an attorney?

“Usually you don’t need an attorney until you’re sued, and then we’re just triaging things,” Chad Yates told a room full of EforAll entrepreneurs during a recent rundown of the legal issues they might face.

Spoiler: There are lots.

Yates, a lawyer with McNamara & Yates in Mashpee, suggested talking to an attorney so you are prepared when it counts.

The topics a business owner might discuss with a lawyer include how to organize the business, liability for the conduct of employees, and trademarks or trade secrets.

Yates sketched out the different business entities, breaking them down by function and form.

One option is to hang your shingle as a sole proprietor.

“That can lead to some dangers though,” Yates said. “№1 is liability.”

A sole proprietor tends to have a higher tax liability as well, he said.

A partnership is essentially the same thing but with two people to sue.

The Limited Liability Corporation, or LLC, is what likely applies to most of us, according to Yates.

LLCs and corporations are like silos that are intended to keep a buffer between the businesses’ liability and the business owner’s personal assets.

“Here’s my money and here’s my businesses’ money,” he said. “Sometimes it’s a good idea to keep those two things separate.”

Great you’re saying. More money, more money, more money.

But with a growing business there are also more employees, which can mean more problems, according to Yates.

Consider just a few: Substance abuse, social media scandals, workplace romance, accidents.

But liability and lawsuits may be the cost of doing business.

“You’re not a real business entity until you’ve been sued (at least) once,” Yates said, repeating a mantra with which he teased a friend who had started his own business.

So, how to protect yourself from potential liability related to the business?

Setting up an LLC or corporation can help, as can talking to an attorney early and figuring out when a contract is needed.

Renting is a good example of the latter, Yates said.

“If you sign a year lease you can’t just do it verbally, it should be in writing so it can be enforceable,” he said.

Next up was intellectual property.

“There’s a lot of facets to intellectual property,” Yates said, outlining four categories: trade secret, patent, copyright and trademark.

Yates ran through the rights and limitations of trademarks and patents, changes in the power of non-compete clauses, and what makes a trade secret. (Hint: it has to be a secret.)

The stakes can be high.

“They’re actually criminal prosecution involved if you’ve violated a trade secret,” Yates said. “It’s scary consequences.”

So, besides being a secret, what makes a trade secret?

“The more valuable it is, the more likely it is a trade secret.”

“Does the information in fact have value as a secret?” (The Coca Cola formula for example.)

“The more time and energy you spend keeping something secret, the more likely it is to be a secret.”

Is it easily discernible? Simple?

“Can you just Google that?” Yates said.

“A trade secret is the way you do something,” he said. “Even if it’s part of the public domain the way you do it is protected. It’s something valuable, it’s something you make money from.”

So, as much as every entrepreneur wants to focus on their passion and own expertise, help from a legal expert can be equally important. The entrepreneurs in the room clearly had plenty of questions about their liabilities and other potential legal pitfalls.

“A lot of people don’t do these things because they want to focus on their business not the legal paperwork,” Yates said.

Who wants to focus on paperwork? I, for one, would rather be fishing.

Patrick Cassidy owns and operates Cape Cod on the Fly, a Massachusetts-based fly fishing and light tackle guide service.

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Entrepreneurship for All (EforAll) is accelerating economic and social impact through entrepreneurship in mid-sized cities.

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