In meetings with clients, I often find that this is the first time their company has consulted a legal counsel. The reason is almost always the same: cost. Indeed, many entrepreneurs feel that legal services are too costly and don’t add enough value to their business. As a result, they often consult a lawyer on the eve of a major event, such as a sale, the signing of a lease or the search for financing. At that point, in addition to managing the ongoing transaction, we, as lawyers, often have to regularize the company’s previous legal aspects. However, a lawyer can play a crucial role from the earliest stages of a company’s creation, helping entrepreneurs to make informed choices that will avoid future complications.
1) Start-up stage
When setting up a business, entrepreneurs face a number of important decisions, one of the first of which is the choice of legal structure. In Quebec, several options are available, the simplest and least costly being sole proprietorship. While this option is suitable for some, it is not always ideal for all entrepreneurs. For many reasons, other legal structures, such as a corporation, may be more suitable. A lawyer can help you make this crucial choice by asking questions about your long-term vision for the business.
Once you’ve decided on your legal structure, it’s a good idea to consult your legal advisor about setting up your company. Incorporation, for example, is often the preferred option, as it separates the company’s assets from those of its owners, thereby limiting their personal liability. However, the incorporation process is complex and requires in-depth knowledge of Quebec legal requirements. Your legal advisor can not only guide you through the process but can also take charge of setting up the company, thereby avoiding costly mistakes. For example, forgetting to add a restriction on the transfer of shares, a requirement for maintaining a private issuer status, could result in significant costs.
Choosing a company name is another issue where a lawyer can be of great help. Although we’re not marketing experts, there are laws and regulations governing the choice of a business name. Furthermore, a legal advisor will be able to guide you if you’re thinking of registering a trademark in the future, thus saving you the costs associated with a possible rebranding.
2) During the life of a company
A legal counsel is your right-hand man in business, an ally and a watchdog. He can intervene in many areas.
The most common is the drafting of contracts. As a first step, your lawyer can help you identify the contracts and policies that are essential to your business, then draft them to ensure that they are appropriate to your activities and comply with the law. Calling in a professional will help you avoid unenforceable or invalid clauses.
Labor law is another crucial area. Every company with employees has legal obligations. Your lawyer can not only draft your employment contracts, but also advise you on non-competition and non-solicitation clauses, and on employment conditions, while ensuring that they comply with Quebec labor standards. In addition, he can assist you in your relations with your employees and in the event of litigation before the CNESST.
Growing SMEs may also need legal advice to secure financing. Whether it’s a bank loan or an investment, it’s a good idea to have the documents reviewed by a legal advisor to ensure a clear understanding of the commitments and to negotiate the terms of the contract.
3) Selling or buying a business
Last but not least, the sale of a business is one of the most frequent matters on which business lawyers are consulted. Your lawyer can negotiate the terms of the sale, make recommendations and prepare the necessary documentation. However, preparing the business for sale is often overlooked. It’s essential to consult your lawyer well before starting negotiations with a potential buyer. All too often, sellers find themselves having to update their structure or make changes at the last minute, which can lead to high costs and delays. A well-prepared transaction will avoid inconveniences that could even jeopardize the sale.
The same applies to the purchase of a business, which is just as complex and requires careful attention to legal details. Whether you’re looking to acquire an existing business to diversify your activities or to enter a new market, your lawyer can support you every step of the way. This includes due diligence, deciding whether to buy the shares or assets, negotiating the terms of the purchase, and drafting or revising contracts. Due diligence is particularly important, as it reveals hidden liabilities or potential problems that could affect the viability of the acquisition. With the right advice, you can be sure of making an informed decision and concluding the purchase on terms that protect your long-term interests.
In conclusion, hiring a lawyer from the outset and throughout the life of your business is an investment that can save you time, money and a great deal of inconvenience. Whether it’s choosing the right legal structure, drafting contracts, navigating the complexities of employment law, or preparing a sale, a legal advisor provides indispensable expertise to secure your operations and protect your interests. The costs associated with legal services are often far outweighed by the benefits of proactively managing the legal aspects of your business. Don’t wait until a problem arises to consult a legal advisor; make your lawyer a strategic partner in your SME’s success. Don’t hesitate to contact us to discuss your company’s needs.
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