When Does A Business Need An Outside General Counsel?

When a business starts out, there is an operating budget whether the bank is providing capital, the business has angel investors, or they work with private equity. The business starts operating and needs someone to handle the sales, manufacturing, and finance. Sometimes, the initial owners who are entrepreneurs try to absorb those jobs. Over time, the entrepreneurs either know that they are not the ideal person for the job or find that they cannot do everything. They hire a Chief Financial Officer or a VP of manufacturing or sales. During that time, the business owner tends to use attorneys, but only when they need to. As a result, the CFO is doing their job and that of an in-house general counsel to manage the legal issues of the company.

In this time of remote, virtual, or fractional type talent that is available, that idea of the CFO managing the legal side of things is old school. The fact that a company may not yet need a full-time in-house counsel, or feels that they cannot afford one, is no longer a reason to not build a legal platform to eliminate to the extent possible “fires” that may occur in the business. So, if the company thinks that the number of employees or the amount of revenue matters to choosing to work with an outside general counsel, that is not the case.

An outsourced general counsel is the attorney for your business who doesn’t need office space, benefits, or other employment requirements. They provide legal services like a member of your team on a set monthly fee making sure that you are not only prepared for legal issues, but you are taking proactive steps to prevent them. They also work with you on your strategic planning.

Small businesses that are under $10 million in revenue really benefit from the use of an outside general counsel, as there are compliance issues that need to be regularly dealt with. The business may do business in more than one state which requires multiple filings. Each state may have separate requirements. The company may be using a minority status to obtain its contracts, which require additional filings that need to be managed. The business may have a number of subsidiaries that all have their own compliance issues that need to be dealt with. Smaller manufacturers may also need to deal with OSHA filings. An outside general counsel will be able to organize that process and make sure that the compliance filings will not fall between the cracks.

A business that is between $10 million and $90 million has more people issues, plant issues, real estate issues, growth concerns, all of which really require the talent of a great outside general counsel who will make sure that systems and processes are implemented among the various departments. The outsourced general counsel will also look at areas where training is necessary to make sure that legal issues do not arise. Although safety falls generally in the manufacturing end of the business, it is also a legal issue, if there are no, or insufficient, protocols or training to preclude an accident.

The difference between the needs of the business with under $10 million in revenue and those businesses over that amount is that there are even greater needs for that outsourced general counsel to build and monitor the legal platform for the business. The difference is not that the small business does not need the outsourced general counsel, but it is one of degree of need. Both small and midsized businesses need the protection of an outside general counsel, who can participate in the growth of the business and has the historical perspective of the business as it grows.

Having a great fit outsourced general counsel for your small to mid-sized business will create a solid legal platform, eliminate the regular fires, and prepare the business for great growth of the company going forward. It is an excellent resource that is often overlooked, but when utilized saves businesses time and money, while helping them focus on core business which allows them to better reach their goals.

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Denice Gierach

Gierach Law Firm

Denice Gierach is an attorney, CPA, Northwestern University business master's graduate, and has owned several businesses from real estate to manufacturing. She is the lead attorney at Gierach Law Firm in the Chicago area. With more than 30 years of experience, she has been a respected and sought-after resource for businesses looking to grow, sell, solve problems, and succeed long term. Her insights across business areas gives a fuller lens to business issues and solutions, and helps businesses grow and succeed with less time spent on legal issues and other time-consuming problems.

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