Blogs by William Manchee
Defending the Small Business - Part 20, Getting an Attorney
1/25/2009 6:30:19 PM
When your business is in trouble getting the right attorney will be critical to survival. Unfortunately, this task is more difficult than it might seem...
Once the business is stabilized, then all attention must be turned to making it profitable. Whatever mistakes have been made in the past must be identified and eliminated. To do this, an attorney, accountant, and possibly a business consultant will be needed. Think of your small business as a small kingdom at war. You are surrounded by armies ready to attack at any moment. They have one objective, and that is to take everything you own at any cost. Your attorney is the commander of your armyóthe army who will defend you while youíre trying to rebuild your kingdom which holds all your worldly possessions. Pick your commander carefully, as his or her skill will be critical to your survivalóand for godsakes, pay him so he wonít abandon you.
It amazes me how SBOs in desperate trouble treat their attorneys. Often their bills are neglected or ignored altogether when they are in the heat of battle. The SBO often treats the attorney like he is just another creditor, expecting him to work without being paid. But few attorneys will put up with this and, if you run up a big bill with your attorney, youíll soon find yourself with a new, more dangerous creditor at your heels demanding payment. So remember, if you donít pay your army, they will neglect or abandon you, and always at a time when you can least afford to be defenseless.
If your attorney is so critical to your survival, how do you find the best one for the job? Usually, the best way is by referral. But only accept a referral from someone who has used the referred attorney in a similar situation. Many people refer an attorney they know nothing about. They may have seen him on TV, heard his ad on the radio, or found out about him from a friend or relative. Every week I get similar referrals of clients from people who donít know me. While I appreciate these referrals, youíre not doing anyone a favor if you refer them to someone you know nothing about.
It is also important that the referred attorney is experienced in the area for which you are seeking representation. A friend might refer you an attorney who did a great job handling his divorce, but that same attorney is not likely to be the best person to guide you through a successful reorganization of your small business.
If you can't get a referral from someone who has successfully reorganized their business, then you may have to turn to a referral service. The local bar association is probably the best, but you still must be selective. The bar associations do not screen the attorneys who they recommend. Usually the criteria is simply that they are licensed to practice law, are a member of their association, and have malpractice insurance. You need to interview the attorney referred to you to be sure he or she is experienced in helping a small business under siege. The sure test of the attorneyís ability is to ask the attorney for references from three small business owners who he has successfully reorganized. If he canít or wonít provide those references, keep looking.
Once you have found the right attorney, confess to him all your sins. Be honest and tell him everything that might impact the defense of your business. Everything you tell your attorney is confidential, so donít be timid, shy, or too embarrassed to tell all. The worst thing for an attorney is to be blind-sided at trial or in a hearing. On one occasion I was helping a middle-aged woman shut down her failed business. It appeared to be a simple Chapter 7 bankruptcy, but she seemed to be a little more nervous than expected. I quizzed her about it and she said it was just her nature. At the creditorsí meeting, her nervousness increased, and during my questioning she suddenly confessed to having $25,000 in cash stuffed under her mattress.
Of course, I was flabbergasted and greatly disturbed, because failing to disclose assets in a bankruptcy is a criminal offense. Fortunately, I was able to convince the trustee that the woman simply thought because the money wasnít in her checking account, she didnít have to report it. This is a common misconception of debtors. They think that by giving cash or property away to a friend or relative, they donít have to report it on their bankruptcy. My client was lucky she didnít end up in jail.
The sad thing is she lost $25,000, that she probably could have kept had she been honest with me. If I had known she had $25,000 we probably could have figured out how to legally keep it or spend it prior to filing bankruptcy. Since she wasnít honest with me, she lost the money and nearly ended up in jail.
Many states have so-called board certified attorneys, who have special training in a particular area of law practice. Whereas a board certified bankruptcy attorney may be excellent at getting you through bankruptcy, he may know nothing about the proper structure of your business, minimizing estate taxes, or handling employee issues. A general practitioner, who is a small businessman himself, may actually be better than the bankruptcy specialist.
Sometimes you will need more than one attorney to get you through the problems you face. In one instance we were representing a client who was having financial difficulties due to of an automobile accident. He had been cut off by a large truck and suffered a severe concussion that left him with brain damage. He could still function, but lost the ability to run his business. In this case, we were able to handle his personal injury claim and file a Chapter 13 bankruptcy to try to preserve his business until he could recover, but we were not competent to handle a Social Security disability claim. We, therefore, referred him to an attorney who specialized in Social Security disability and monitored that case closely while we prosecuted the other actions. If you need more than one attorney, hire them, but select just one to be in charge of all the others so he can coordinate your legal affairs during this critical reorganization period.
Once you have one or more attorneys, keep in touch with them. Be sure you advise them immediately of any communications from creditors or new circumstances that could impact your reorganization. Your attorneys should promptly return telephone calls, but if they donít, be persistent and donít give up until you have reached them. Attorneys are busy and often take too long to return phone calls. If you canít get through immediately to the attorney, talk to his secretary or legal assistant. They are usually much easier to contact and will have direct access to the attorney.
If communication with an attorney becomes too difficult or impossible, then hire a new one. You have the right to hire and fire your attorney at will, so donít be afraid to do so if necessary. This may be your one chance to get your business on track, so donít let a bad choice of an attorney keep you from attaining your goal. Remember it is your future that is at stake, so take charge of the situation and do what it takes to be successful.
Next: Form of Business
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6 - Defending the Small Business - Giving it away. - Thursday, October 16, 2008
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4. Defending the Small Business: Suffocation - Tuesday, October 14, 2008
3 - Defending the Small Business: Looting - Monday, October 13, 2008
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