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  • Small Business Briefcase – The Attorney is in: Answers to Common Legal Questions

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    The ins and outs of contracts, liability and other legal issues that can affect a small business can be complex. And sometimes, you don’t even know what you don’t know. We asked local lawyer Davis H. Smith, a partner at Montgomery’s Bradley Arant Boult Cummings office, to answer a few common questions.

    Can an attorney help me to collect money?

    DS: This is a tough issue. On the one hand, the inability to collect cash from work you perform or services you provide can be devastating. But on the other hand, many businesses are dependent on repeat clients. So you first have to weigh the benefit of collecting funds versus running off an otherwise good client who might be dealing with a temporary setback. But when you feel like you need to take action or just want to bounce ideas off someone, that’s when you speak to an attorney. They can help you navigate the rules of debt collection. There are restrictions on what you can say in correspondence with a debtor. There are restrictions on ways to communicate with them, so it is important to know those things so you can be in compliance with creditor and debtor laws. There are also bankruptcy considerations. If a client is on the verge of insolvency, an attorney can help you preserve your rights should they go into bankruptcy.

    If I’m a sole proprietor, should I incorporate or create an LLC? If you operate as sole proprietor, that means creditors can come after not just your business assets but personal assets. This includes someone who has won a lawsuit against you. But if you operate your business inside an LLC or corporation, the only recourse creditors have are the assets inside that business entity. I think it is always a good idea to be an LLC or incorporation for the protection it offers. Once you decide to go this route, you choose between forming an LLC or incorporating. My personal preference for a small business is LLC because it provides the most flexibility for an owner in how it can be set up, particularly if you are a business that looks to grow in future. LLCs also have tax benefits: You are only taxed once on the income you earn through that LLC. This income flows through to your personal tax return.

    Should I trademark my business? The internet allows businesses to have reach well beyond anything they had before, and that’s great to reach customers, but with reach you also run the risk of stepping on toes of other companies who may, unbeknownst to you, have a similar-sounding business name or product name to yours. You can file for a trademark with the secretary of state that provides some protection, but if the name (for your business or product) is truly unique and very valuable to your business, you really should speak to a specialist in this area. Intellectual property laws are very complex, so you need someone who really knows this stuff if you feel the need to go beyond the basic trademark.

    Should an attorney review my contracts? If it is a contract you will use in day-to-day business or one that covers a really important matter, yes. Sometimes when you find boiler plate contracts online, etc., they are real and may be beneficial, but laws can differ greatly from state to state. That means some terms might not be applicable, and you may not be preserving the rights you think you are.

    Intrigued by this topic? Join us at the next Small Business Briefcase Panel Session to discover more.

    Davis H. Smith is a partner with Bradley Arant Boult Cummings LLP, practicing in the corporate, securities and tax groups.
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