Entrepreneurship, 3rd Edition

CHAPTER 12

LEGAL AND TAX ISSUES, INCLUDING INTELLECTUAL PROPERTY

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Why, When, and How to Choose an Attorney

Many enthusiastic entrepreneurs are so excited about where they're going that they forget to consider where they've been. They're surprised to learn that there may be serious limitations imposed upon their freedom of action arising out of their former employment. Some of these limitations may be the result of agreements signed by the entrepreneur while employed in her former position. Others may be imposed as a matter of law, without any agreement or even knowledge on the part of the employee. These considerations are among many that suggest that entrepreneurs obtain an early consultation with an appropriate attorney.

Unfortunately, many people perceive engaging an attorney as an unnecessary expense when beginning a new venture. However, the earlier you can consult a professional, the more likely your business will avoid costly mistakes. For example, without an attorney to advise you with regard to the drafting of a partnership or stockholders' agreement (described later in this chapter), the remaining partners may have no way of retrieving the share of the business owned by the estate of a founder who has left the business for a “better opportunity.” Or the entrepreneur may be confronted by a large income tax bill for his receipt of “sweat equity.” ...