Buyer of Nontraditional Legal Services Beware

All kinds of business forms are offered online, and many of them for free.  Stand-alone paralegal services are offering various sorts of assistance to small businesses for significantly less than lawyers generally charge.  Accounting and bookkeeping services that organize businesses are increasingly positioning themselves as trusted enterprise advisers in ways that potentially can spill over into law-related issues.  And the cost of litigation continues to grow.

It’s thus understandable at some level that small business owners, who operate on modest margins in many cases, would ponder how much they need to continue to rely on their traditional partners in the legal world for the same level of services they typically have in the past and look to the web find alternatives to the services of a lawyer.

The recent proposed spinoff of Big 4 accounting firm EY that would divide the company into separate auditing and consulting businesses—enabling EY to create legally related consulting services given the absence of conflict of interest—underscores the sorts of gray areas that will continue to face businesses going forward.  Especially due to the fact that while a firm like EY still wouldn’t be able to directly practice law, they might have hand-picked attorneys in mind when situations arise that require actual legal expertise.

In addition to the lack of choice in legal provider the latter situation would prevent, the encroachment of non-lawyers into the gray areas—whether they be other professional service firms, paralegals, or online form providers—creates a number of risks for business clients. 

None of these types of services need to concern themselves with the types of ethical responsibilities lawyers are required to adhere to, as officers of the court, for example. And none of them carry malpractice insurance should their legally related services lead businesses astray in some form or fashion.

We have encountered several businesses who organized themselves online and have later had problems.  This is particularly fraught if there are two or more partners/shareholders/members in the business.  Going into a business with a partner is like marrying someone without a prenup agreement: It’s just not a good idea. 

We have worked with limited liability companies that previously used online operating agreements with all kinds of holes that do not protect the partners in the event of a breakup.  It’s always a good idea to consult with an attorney and create a shareholder agreement for a corporation or an operating agreement for an LLC.

Even the filing of annual reports may be a problem if not handled properly. Recently, we had a client whose accountant prepared and filed the annual report with the Secretary of State and included the name of the spouse of the primary owner as an officer.  The spouse had nothing to do with the business, but in spite of that, when the business was sued by a former employee, the spouse was named as a party to the lawsuit.   

As one of Chicago’s top business law firms, we have developed systems to help protect our business clients, from the organizational stages through continued growth.  We have a Corporate Maintenance Plan™ with which our business clients enjoy the benefits of having a continuing relationship with a lawyer. That’s why we identify ourselves as the In-House Counsel for Small Business Owners™.  

We pride ourselves on helping our clients from startup to growth. Experience does matter.