As many lawyers proceed (before they are lawyers) through law school, they are often given warnings by multiple varied professors to be careful when rendering your own legal advice as often you will find that you have a “FOOL FOR A CLIENT” – –
I. WHAT EXACTLY DO WE MEAN – YOU HAVE A FOOL FOR A CLIENT – ?
Most of the time when this saying is used, it is being applied to circumstances, where people are trying to render advice, legal or not, to themselves.
As is the case, in most instances, when one is emotionally involved, financially involved or otherwise personally involved in a matter, they have bias which will prevent them from being truly objective.
II. MY APPLICATION OF THIS BROMIDE IS TO CLIENTS WHO ARE ACTUALLY DRAFTING AND IMPLEMENTING THEIR OWN LEGAL DOCUMENTS – GENERALY THEY HAVE A FOOL FOR A CLIENT –
So, the purpose of this paper is to expose and have all readers, whether in business or not, understand that when they are rendering advice to themselves, and in particular for this paper, legal advice to themselves, the likely have a “FOOL FOR A CLIENT”.
The place where I have seen this show up more and more in the corporate side of the legal practice comes about as follows:
So Mr. or Ms. Business person, hires the law firm of Yak, Yak & Yak – to help them do some business planning; entity formation; partnership between entities and other operational agreements among and between the owners/investors/operators and such.
Then, tiring of the laborious pain of ongoing legal fees, rather than going back to Yak, Yak & Yak, they decide “well this is a no brainer” we can use these Operating Agreements, or Buy/Sell agreements or Management Agreements, because after all they worked in these past patterns.
Wow, sounds logical. Only problem is that Mr. or Ms. Business person so far in their business career have been lucky or simply blessed because the partners or investors they had combined with were either, not proactive; did not care, or were simply too busy to pay any attention to the operations side of the business.
Well, of course, in this anecdote, the new business was just formed with all of the same old templates, turns out to be a business in which the investor all of a sudden, after several months of being passive, wants full and total disclosure, often times termed transparency, which is something Mr. and Ms. Business have never had to deal with before.
They now are super stressed out because they are having to jump through all sorts of hoops that they think are just stupid and meaningless.
To add, to their troubles, not only were the old templates inadequate to address these type of issues, but also, both parties to this series of transaction had never signed the agreements.
So, not only do we have a “fool for a client” but also we are now in a “he said – she said – fight” over what the agreements were/are.
Now, because Mr. and Ms. Business have been very fortunate and never had to litigate they now have the conundrum in front of them as to how much they need to cooperate to avoid going to court; if they go to court how will they prove what their agreement truly is? And if their evidence is not stronger on what the deal is than the defendants, then guess what?
They lose as they failed to meet the burden of proof on the issues to prove their contract; or their lease; or their business agreement; or their investor agreement and so forth.
Now, because of the use of templates without added legal advice, and because of their failure to have the agreements executed, they face thousands if not hundreds of thousands of dollar of legal expenses, the bulk of which could have easily been avoided had they simply chosen to work on a project basis with an attorney willing to do the same. A project basis being start with a template; create a direction; amend the template to comply with the direction and the terms and then make sure the deal or transaction does not go forward unless the documents are signed.
Many people will say “well we do business on a handshake”, and my postulate to that is, that is great until “green turns to brown” – i.e. when someone has taken too long of a vacation; or too much salary; or too much use of the charge cards; or too much drinking on the premises or having friends in to eat or use the products of the business, or simply don’t show up at the business to help run the same. Then the problems get very expensive to resolve – Also, court is or can be very hard to understand conceptually — with questions such as, “hey we won, the jury gave us a verdict”, and now you are telling me that the Judge can act as a 13th juror and take the verdict away — that seems wrong — But it can happen, and does happen.
III. — a Sole Focus — Frugality?
If your sole focus is to save the costs of setting up a company or drafting agreements and NOTHING ELSE MATTERS – such as choice of the correct entity; choice of proper state in which to do business; choice of proper capitalization; proper issuance of shares in exchange for proper consideration and with proper timing of the same; and application of the correct rules to the correlative facts, then, by all means you should use LegalZoom.Com LLC, Inc.
Rocket Doc- service and others.
BUT, if you want to address the other issues set forth herein above, as well ancillary other additional legal issues which come up when organizing a business, drafting key legal documents, you will need to obtain legal advice from an experienced business lawyer, and quite possibly do so in conjunction with the client’s CPA.
CONCLUSION – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
So, in sum, it is your call to decide whether or not, you want to have a “Fool For a Client” – best of luck in making that decision.
Steven H. Wilhelm