The use of the legal profession in small business.

Maniam, Balasundram ; Leavell, Hadley ; Renteria, Brenda 等

ABSTRACT

According to the Small Business Association Office of Advocacy, more than ninety nine percent of the employers in the United States are small businesses. Businesses must operate within the legal system of federal, state, local and foreign governments. Legal representation falls into three general areas: in-house counsel, general representation, and counsel retained for specific and/or complex matters. The small business must find the most cost-effective and economically feasible method legal representation. The purpose of this paper is to analyze the legal needs of small businesses and how they can effectively utilize the legal profession in meeting those needs in an efficient manner.

INTRODUCTION

According to the Small Business Association Office of Advocacy as reported in its 1997 report, more than ninety nine percent of the employers in the United States are considered a small business, where it has less than 500 employees (Characteristics of Small Business Employees and Owners, 1997). President Clinton states that the development of small businesses is the foundation of the United States economic growth, that virtually all new jobs, 50 percent of employment, 50 percent of private sector output, and a large share of innovation come from small businesses (The State of the Small Business: A Report of the President, 1998)

A small business encompasses a wide-range of business types and sizes. A small business can be home-based, sole proprietorship, a partnership, a S-corporation, or a C-corporation. Small businesses can be high-tech venture capital-backed dot-coms, mom and pop retailers, and family-owned manufacturers (Batterson, 2000). There is no standard definition for a small business. It is independently determined from one government agency to another. The Committee for Economic Development created the most practical definition of a small business.

To qualify as a small firm under their definition, a business must have at least two of the following characteristics:

1 Management of the firm is independent. The managers are typically also the owners.

2 Capital is provided by one individual, or a small group of people.

3 The area of operations is mainly local, with workers and owners living in one community. However, the market for the product or service need not be local.

4 The size of the firm is small relative to the industry. This measure can be in terms of employees, sales, volume or assets (Boone and David, 1970, pp. 522-523).

Business law is playing an increasingly important role in the free enterprise and the small business. Businesses must operate within the legal system of federal, state, local and even foreign governments. Laws that affect the small business continually are being enacted. Small businesses not only have their own unique legal issues, but also have many of the same issues that large corporations face. Most small businesses are in direct competition with large corporations who have large-scale in-house legal departments at their disposal and several outside firms on retainer. Small businesses do not have these costly resources at their disposal. The small business must determine how to effectively utilize the legal profession for its particular business needs in the most cost-efficient manner and yet remain competitive with the large corporations in its industry. The purpose of this paper is to analyze the legal needs of small businesses and how they can effectively utilize the legal profession in meeting these needs in an efficient manner.

LITERATURE REVIEW

A survey of existing literature has many detailed studies into the management of small businesses. Several studies such as Boone and David (1970), Longenecker and Moore (1987), Curtin (1982), Sherman (1997), and Smith (1982) give an overview of small business management and a hands-on perspective of small business management. These studies gave only small synopsis of the legal issues facing small business and the types of legal representation available. On the other end, studies such as (Frese, Gelderen, and Ombach, 2000) are about the dynamics of business planning, which carries over into planning for the legal issues of the business. The U.S. Small Business Administration Office of Advocacy has many studies and publications readily available to help the small business owner in establishing and running the business. They also gave many statistics used in examining the importance of legal issues, such as capitalization and dissolution of the business. The State of the Small Business: A Report of the President 1997 presents timely issues that small businesses face and how the legislation of laws effect small businesses. There are many articles in literary journals, law journals, and business journals dealing with specific legal issues that small businesses face today, but there was virtually no direct studies on the use of the legal profession. There are seminar materials of the legal profession on how to represent small businesses, but they direct their study to the legal practitioner and not the small business owner. There are no materials found that give an actual step-by-step analysis of how a small business should utilize the legal profession. The most helpful were from Batterson (2000). Cuykendall (2000) describes how a business worked through its legal issues and determined the best solution to utilize the legal profession for that particular business.

TYPES OF LEGAL ISSUES SMALL BUSINESSES FACE

All business decisions must be made with the legality of that decision. Some business decisions are routine, while others involve complex legal issues. Depending on the nature of the small business, it can face legal issues associated with starting the business, capitalization, labor laws, employee crime, agency relationships, government regulations, consumer protection laws, consumer credit laws, international commerce laws, contracts, real property, negotiable instruments, registration of trade marks, application for patents, copyright protection, libelous acts, complex lawsuits, dissolution, and bankruptcy. The officers and owners of the small business should have some knowledge of the laws and regulations that affect their business, but they cannot have knowledge in every area or keep up with the ever-changing legislation. Last year there were thirtyseven new federal and state regulations that affected small businesses. The burden of the various governmental regulations that must be complied with and the forms that must be completed is a financial drain on the small business (Batterson, 2000).

The first legal issue a small business faces is its start up. The owner must determine whether the business will operate as a sole proprietorship, a partnership, or a corporation. The statistics from the Office of Advocacy of the U.S. Small Business Administration in a 1998 report stated that in that year small businesses consisted of 5,199,000 corporations, 1,712,000 partnerships, and 16,754,000 sole proprietorships (SBA Office of Advocacy, Small Business Answer Card, 1998).

There are many factors to be considered in determining of the type of business organization to form, including legal ramifications. It can take several different specialized professionals to give an analysis of this issue. It may require an expert in the industry, a banker, a certified public accountant, a tax attorney, and/or an international law attorney. In addition, if the business is a franchise, there will be additional legal organization formation issues. The franchisee, as an independent businessperson, contracting for a franchise business with a large corporation will have additional legal issues regarding the contracts tied to the franchise agreement (Boone and David, 1976).

Capitalization of the business will be the next legal issue for the new business owner. Approximately seventy five percent of small businesses use a supplier of credit. These consist of traditional credit lenders (traditional loans, commercial banks, finance companies, and leasing arrangements) and non-traditional lenders (owner loans, personal credit card, and business credit card) (SBA Office of Advocacy, Small Business Answer Card, 1998). The cost of borrowing for a small business owner is high. The small business owner pays two to three points above the prime rate for bank loans and, in fact, the smaller the business, the more it relies on owner capital (SBA Office of Advocacy, The Facts About Small Business, 1999). Under- capitalization can be disastrous for small business. A small business that is undercapitalize is much more likely to experience financial difficulty that leads to legal problems (Sherman, 1997). It is important that the business be organized and capitalized so that it maximizes its possibility for success. The counsel of an attorney can fill several important roles assisting a small business owner seeking financing. First, the attorney should examine the legal records of the business to make sure they are in order, up-to-date, and complete so that financing will not be denied on this technicality. Second, the attorney can provide a "sense of the market" interpretation of the lender's loans documents (Hardt, 1989). These documents are usually very burdensome. The attorney will have an understanding of similar loan transactions and be able to help the borrower understand what provisions are negotiable and what provisions are not negotiable. An attorney can also head off many potential mistakes in dealing with venture capitalist. Most disputes between business owners and private investors are concerning unforeseen issues. An attorney experienced in this type of financing can help minimize future problems by raising them during negotiations (Hardt, 1989).

A small business owner that has employees will have labor law issues. According to the report of the SBA Office of Advocacy, small businesses employ fifty two percent of the private workers (SBA Office of Advocacy, Small Business Answer Card, 1998). An attorney specializing in business law can help design and structure a sound non-compete contract and confidentiality contracts. Also, depending on the size of the small business and the type of industry it is in, advice from an employment law specialist will be needed regarding employee rights and workplace safety. Employee crime is a growing concern for small businesses where it cost the U.S. economy at least $186 billion annually (Kuratko, Honrsby, Naffziger and Hodgetts, 2000). It is reported by the United States Chamber of Commerce that in 1995, thirty percent of all small business failures resulted from the cost of employee dishonesty and that small businesses are thirty five percent more likely to suffer from business crime than larger firms. The United States Chamber of Commerce further reported that the major areas of employee crime are credit card and check fraud, embezzlement, internal theft, computer fraud, and inventory shrinkage (Kuratko et al, 2000). Legal counsel can be helpful to the business owner in implementing a course of prevention by understanding the legal issues involved in how to legally observe employees, perform background checks, and use other safeguards. In the event of an employee crime, legal counsel can also advise on how to handle the matter from the point of discovery to possible prosecution (Kuratko, et al, 2000).

There may be times when a small business owner requires a representative to act in his or her place. Agents are the employees, partners, directors, corporation officers, and sales personnel of the business. Counsel from an attorney in establishing and forming agency contracts is important because the small business owner is bound by the actions of the agent (Boone, et al, 1978). The small business owner is liable to the agent for abiding by the agency contract, whether written or oral, and to third parties for the performance of contracts made by its agents acting within the scope of the their authority. The small business owner is also liable for fraudulent, negligent, and other wrongful acts of an agent if they are executed within the scope of the agency relationship (Longenecker and Moore, 1987).

Small businesses should consider establishing a legal compliance program. All employees and officers of small businesses must be aware of the legal implications of their actions as representatives of the company. The general business attorney can draft employment agreements and help develop legal compliance programs that include, legal audits, legal compliance manuals, employee seminars, form letters, checklists for routine transactions, established procedures for record keeping, and file management (Sherman, 1997).

Governmental regulations, federal, state, local and international, can be overwhelming to a small business. First, the small business owner must know there are regulations, adhere to those regulations, and complete all the required paperwork (Batterson, 2000). Jere W. Glover, Chief Counsel for Advocacy, U.S. Small Business Administration, and a spokesperson for the small business, testified before the U.S. Senate, Committee on Governmental Affairs: "Paperwork and reporting requirements are a major cost problem for small businesses. Small companies do not have specific staff to complete the myriad of reports required by government. Often it is the owner or the CEO who must take on this task, making it a very high cost activity for small business, diverting a valuable resource from running the business to an activity that does not generate revenue or contribute to the firms output.... The proposal [S. 1378] recognizes an implicit truism, namely that small businesses do not have the resources to track all paperwork requirements and are likely to learn of their legal obligations for the first time when an investigator walks in their door" (Glover, 1999, pp. 1-3).

Glover (1999) went on to state how the cost of governmental paperwork never disappears from the books and produces and inequitable cost allocation between small and large firms that give the larger firms a competitive advantage in the market place. The advice of a legal professional familiar with the industry of the small business and the types of governmental regulations that effect it is needed at the startup at the business, at times when the business makes costly changes, and at periodic intervals to ensure compliance of those regulations.

Business owners should familiarize themselves with consumer protection laws, including rules against deceptive advertising and pricing and consumer credit law, if the business extends credit to its customers. There are many laws--federal, state, and local-enacted to protect the consumer (Smith, 1982). The advice of legal counsel may be needed to educate the small business owner in order not to violate the consumer's rights and also to inform the small business owner of his or her rights.

International commerce is the norm rather the exception in this economy today. As President Clinton (1997) stated, his administration has led the nation in the global market with 240 trade agreements that removed foreign barriers to U.S.-made products. This measured was particularly aimed at the small business owner. President Clinton recently took steps to create a task force to help small businesses take advantage of improved trade relations with China, Africa and the Caribbean Basin. Under this recent legislation, the U.S. lowered trade barriers with China and fifty-eight other nations. With international commerce come additional legal issues with the other country's laws and regulations. If difficulties arise in the foreign business dealings the small business owner may need to look for protection of their financial interests through the international legal system. It is important to have the expert skill of an attorney familiar with international commerce to negotiate the numerous, complex aspects of international business transactions and include in such contracts and agreements precautions that can be enforced through the international legal system (McCubbins, 1994).

Almost all-small businesses will at some time enter into a contract. It may be in writing or could be verbal. In the actual operation of the small business, depending on the industry, it will face different types of contracts from leasing building space to agreements with suppliers, distributors and end users to real estate. "Contract law is the legal foundation upon which the normal course of business dealings is constructed" (Boone and David, 1976). A general business attorney who is proficient in drafting contracts can be instrumental in reviewing contracts for their legality, enforceability, and if they accomplish their purpose. If a party breaches the contract there are legal remedies and statutes of limitations that the small business owner needs to be aware (Longenecker, 1987). It is important to contact legal counsel as soon the small business owner is aware of the breach or even a possible breach of the contract to ensure that the statue of limitations does not run out.

Negotiable instruments are a common part of business. Negotiable instruments are credit instruments that can be transferred from one party to another in place of money, such as promissory notes, drafts, trade acceptances, and ordinary checks (Longenecker, 1987). Like contracts, some of the more complicated negotiable instruments need to be reviewed by an attorney for their legality, enforceability, and if the accomplish their purpose.

Patents, trademarks and copyrights are business assets that should be carefully guarded by the owner (Boone, p. 551). A patent is the registered right of an inventor to make, use, and sell an invention. A trademark is a word, figure, or other symbol used to distinguish a product sold by one manufacturer or merchant. A copyright is the registered right of a creator (author, composer, designer, or artist) to reproduce, publish, and sell the work which is the product of the intelligence and skill of that person. (Longenecker, pp. 246-249). According to the U.S. Small Business Administration, of the 4.5 million workers in high technology occupations (scientists, engineers, computer programmers and analysts), more than thirty nine percent worked in small firms in 1996. Innovations are expected to increase in small high-tech firms because of the Small Business Innovation Research Program (SBA, The Facts About Small Business, 1999). The patent, trademark and copyright each have an application and registration process with a governmental agency to ensure their protection. Legal counsel specialized in these areas of law can complete the application and registration process quicker and easier than if the small business took on the task itself.

It is also important to put safeguards and procedures in place that will protect a company's technological resources and assets today and in the future. Creative industries are open to rights disputes because of the workforce turnover, the intangible nature of these assets, and the complexity of the laws. Small companies can rarely afford to fight these disputes because of the high cost both in money and time (Eaglesham, 2000). Legal counsel can be used to draft practices, policies and agreements that assist the company in developing and implementing programs to safeguard the company's "proprietary information, processes and products" and help develop a program to protect technological knowledge and resources from being misused (Gegenheimer and Glaze, 2000).

In most small businesses the time will come when it decides to file a lawsuit, there is a lawsuit filed against it, or arbitration is demanded. In any event, litigation can be very costly to a small business both in time and money. Litigation take the owners and employees away from operating the business to attending meetings with attorneys, gathering documents and information, appearing at depositions, attending arbitration and mediation proceedings and/or attending court proceedings. A trial can last from one day to several months. The small business will also be running up expenses not only for the attorney's billable time, but also for expenses that can be very costly. Finding a competent trial attorney is an important factor when a lawsuit is involved. Equally important is finding a trial attorney that the small business owner can trust and work with (Curtin, 1982). The attorney usually requires a written engagement or representation agreement that sets out the understanding of the matter being handled, the basis of the attorney's fees to be charged, and how payment of the fees and expenses will be handled. A retainer is sometimes required before the representation commences (Burton, 1992).

Continuation of the company after the owner's death is one of the most current issues today. What happens to the business in the event of the owner's death? A small business owner builds a successful company and then upon his or her death the death taxes are so high that family heirs often lose the business (Batterson, 2000). Clausen (1999) recently reported that few family businesses survive into the third generation. According to Claussen (1999), Only thirty percent survive for more than one generation, 15 percent last for two generations, and 1 percent survive for three or more generations. He further reported that the leading causes so many family businesses fail are: unresolved family discord and indifference; bad management, including lack of leadership and training, lack of or inadequate business succession and wealth transfer planning, high taxes (death and income taxes), unforeseen catastrophes, and other problems (environmental liability, natural disasters, labor strife).

It is important for the small business owner to formulate a formal succession plan to ensure the continuation of the business after his or her death, whether to pass it on to the next generation or sell it. Succession planning is a process developed to guide the owner and his or her family in successfully continuing the family business. It includes business management, financial management, stock ownership and family participation planning. The business attorney can assist the family business advisor in planning this process (Clausen, 1999).

Sometimes it is necessary for the small business to come to an end either voluntarily or involuntarily. Terminations, failures, and bankruptcies reported by the Small Business Administration for 1997 were 994,283. Further statistics of the Small Business Administration show that most small businesses fail during the first few years, twenty percent within the first and second year after startup (State of the Small Business: A Report of the President, 1998). Careful planning must be done for dissolution just as it was done for the start up.

If a business chooses to file for bankruptcy, it takes many months of planning with professionals, accountants, and attorneys before filing takes place and then the bankruptcy process can take a year or more. The business owners must take into consideration the chapter (liquidation or reorganization) it will file under. Also, if the business is a partnership, personal bankruptcy proceedings are usually initiated simultaneously because as a matter of law the partners are personally liable for the business debts (Campbell, 1997). Only ten to fifteen percent of small companies choosing bankruptcy reorganization emerge with a plan of reorganization and more than half of those, end up liquidating within five year (Campbell, 1997). An important factor to those statistics is the fact that bankruptcy administrative costs averaged more than eight percent of total asset book value of the small business, while large publicly traded firms averaged almost three percent of firm book value (Campbell, 1997).

TYPES OF LEGAL REPRESENTATION

Realizing that the small business owner needs competent legal counsel for many different matters, it can be interpreted that it also needs different types of legal counsel to represent it. Legal representation falls into three general areas: (1) in-house counsel that could be a staff employee or an officer, (2) general representation--legal counsel hired outside of the firm to handle common/routine matters, and (3) counsel hired for specific and/or complex legal matters. The small business must decide the most cost-effective and economically feasible method of legal representation without compromising the integrity of the company. This could result in utilizing one or a combination of any of the three types of legal representation.

In-house counsel is part of the company and can be either an employee or officer. An in-house counsel fills multiple rolls as employee, attorney, and client. As an employee of the company, his or she is a businessperson looking to keep costs down and profits high. Particularly in smaller companies, or those that have a major legal aspect to their business, the in-house attorney is often a part of the important decision making events within the company (Craig, 1991). As an attorney representing the best interest of the client, the company, the in-house counsel must be able to focus on the legal representation of each matter. In-house counsel is also the client, as the representative of the company, when reviewing matters with outside counsel (Craig, 1991).

In-house counsel is usually a salaried employee of the company. This could be very costly depending on the years of experience and the benefits and perks given to professional employees. Depending on the nature of the small business, having the resources of in-house counsel may be essential to the daily or seasonal operation of the small business. It is usual procedure in large corporations for all contacts to be completed through in-house counsel (Craig, 1991). If contracts were a daily operation of the small business, then an in-house counsel would not be an added expense, but an integral part of conducting business. On the other hand, if contracts come up occasionally or only during a certain time of the year, in-house counsel would be an unnecessary added expense for the remainder of the year.

General Counsel for Home Interiors & Gifts, Inc., Tina Simon, says working as an in-house lawyer gives her the opportunity to work not only as a lawyer, but also as a part of the company's business team. In 1999 she spent most of her day working on real estate transactions. Ms. Simon says the challenge for 2000 is helping the company move into cyberspace. "My job is to make sure there aren't any pitfalls." Because Ms Simon is the only in-house lawyer at Home Interiors, she sees herself working as a solo practitioner in some ways, but in other ways as part of a team with outside counsel working with her (Jeffreys, 2000a).

In-house counsel for Taco Cabana, Becky Rainey, says she sees her role as making it easier for the other employees to do their jobs. Ms. Rainey considers her function as support and the other department heads has internal clients. Ms. Rainey says she leaves business decisions up to other executives at the company, although she makes recommendations on the best course to take under the law. Though she hires outside counsel to defend Taco Cabana in litigation, she keeps up with the status of the lawsuits by reviewing all pleadings and documents in the cases (Jeffreys, 2000b).

Although, there are several approaches to keeping in-house counsel costs down. One approach is the professional temporary staffing. The temporary help industry has moved from clerical help to the professional help of certified public accountants and attorneys. The downside is that these professionals are usually in the first years of their career and gaining experience.

Another alternative where legal proceedings are a common part of the business is where in-house counsel works as co-counsel with outside counsel. From this alternative, the relationship of in-house counsel and outside counsel is a team, working together for the good of their common client, the company (Craig, 1991). This practice would keep costs down by hiring an inexperienced in-house counsel to do most of the legwork and the more experience outside counsel handling the more complex areas.

A small business owner needs to have competent and compatible general business legal counsel for those legal issues in its business that come up routinely. Most of the attorney's contribution is to provide information for specific questions, review contracts or other documents, and for legal counseling. This attorney-client relationship should be a continuing one (Longenecker, et al, 1987). The attorney will not only be providing legal counsel but also business advice, "and it is rarely clear when the advice crosses over from one to the other" (Craig, 1991).

There is no easy way to choose an attorney. Once an attorney receives a license to practice law he or she is considered competent to practice in all areas of law, with a few exceptions (Curtin, 1982). Some attorneys obtain specialized certification, which gives the client some assurance that the attorney is specially competent in that area, but other attorneys who are not certified can be equally or even more competent in that area of law. When choosing an attorney, the small business owner should look for someone whom he or she believes can do the job. The small business owner also wants and attorney he or she can work with and whose fees are reasonable (Curtin, 1982).

It is wise for the small business owner to develop a long-standing and on-going relationship with a business lawyer. The business attorney being familiar with the business will make him or her more efficient and effective in handling its matters (Smith, 1982). Once an attorney-client relationship is established, the client should utilize the attorney's services promptly whenever the need arises (Longenecker, et al, 1987).

There are many pitfalls and problems in business that legal counsel is advisable. The small business owner should have a lawyer review any leases or contracts before signing them. If there are problems with creditors or legal documents need to be reviewed, the advice of a competent business lawyer that the small business owner trust is indispensable. Another area that a good business lawyer is valuable is that of objective negotiation. The small business owner will encounter many situations in which he or she cannot be subjective. A good business lawyer can remain emotionally detached from the situation and focus on the objective of the negotiation (Smith, 1982).

A newly innovated ideal that larger firms are using and that can also be utilized by smaller firms is the "convergence" ideal. It is the process of consolidating work with proven cost-effective outside counsel this is believe to achieve a better return on services and prices by competitively bidding requirements for litigation counsel (Cuykendall, 2000). The business sends out requests for proposals to solicit law firms called "primary providers" to represent the company in specific matters or specific areas. The law firms that are interested in this arrangement returns a bid proposal to the company and the company makes the final selections. An example would be if the small business had a lot of collection work it would send out a request for proposal to law firms that it has investigated or done business with in the past. Those law firms that are interested in this relationship would send the company a proposal of how it views the relationship, how it would represent the company in this matter, what it would charge for attorneys fees, what it would charge for its inhouse expenses, how it would keep outside costs down, and how it would bill the company. From the receipt of these proposals, the company would then make a choice of which law firms to give the business to (Cuykendall, 2000).

For the small business that has only occasional contracts to review and needs only occasional legal advice concerning the business, a general business counsel hired on an hourly basis would be all that is necessary. When more unusual, specific, complex legal situations arise then general counsel can advise and help in obtaining a legal specialist. An attorney hired for a specialized or complex legal issue will have extensive experience and be highly competent in that area of law. It is important for the small business owner to check out the references, credentials, and history of that attorney (Longenecker, et al, 1987).

As a company grows, there will be an increase in the number of its relationships and chances of business conflicts. Most business owners wish to avoid courtroom battles, they would prefer marketplace battles or boardroom battles. Good planning, understanding of legal issues, a good working relationship with legal counsel, and a well-managed legal compliance program will contribute to reducing the risk of litigation (Sherman, 1997). Whether the small business owner is the plaintiff (files suit) or the defendant (being sued) alternatives such as mediation or arbitration should be considered as opposed to going to trial.

When the small business owner ends up in litigation, the problem at the heart of the matter frequently involves business issues rather than legal issues. The small business owner might want to consider minimizing legal expenses by taking charge and contacting the executive on the other side of the suit and use legal counsel only to put the agreement in appropriate "legalese." The goal is it minimizes any drain on the corporate assets and avoids a trial. The company business attorney can be used in an advisory capacity to map out alternatives and cover the most important issues, probable costs for litigation, and likely outcomes (Clark, 1999).

Litigation is very expensive, especially for complex matters, which usually requires the retainer of expert witnesses. A competent attorney in his or her area of expertise can give an estimated range of the expenses, attorney's billable hours, and time frame involved. He or she will also be familiar with past cases and their outcomes and any legal precedents that have been set. Another concern for the small business owner is what effect this would have on its public relations. Also, the attorney, although not be able to predict the outcome of litigation, he or she can give an educated estimate of the outcome and also give a rundown of alternatives to trial, such as arbitration or mediation (Sherman, 1997).

THE COST-EFFECTIVE USE OF THE LEGAL COUNSEL

The small business must find the most cost-effective, cost-efficient and economically feasible method of legal representation without compromising the integrity of the company. This could result in utilizing one or a combination of any of the three types of legal representation. The business owner's goal is to minimizing the legal expenses without jeopardizing the desired result. Preplanning the formation of the company, its capitalization, operation, and the unexpected problems of the business are essential to being able to utilize legal counsel in the most cost-efficient and efficient manner.

To reach any goal in business, including legal representation, an action strategy process is necessary. Strategy is a plan of action that is a sequence of means to achieve a goal and the function of that strategy is to determine the appropriate action to uncertain situations. (Frese, p. 2). According to the study by Frese, et al (2000), of the five different strategy approaches to business, the optimal combination of strategies for small businesses are the Critical Point and Opportunistic Strategies.

Critical Point Strategy concentrates on the most difficult, unclear, and important point. Only after solving the first critical point are further steps planned. There is a clear goal in mind and the concentration is on the relevant task. Critical Point Strategy requires being highly focused on the goal (Frese, et al, 2000). Small business owners who can concentrate on the most important or difficult part of a situation will do best in their business (Frese, et al, 2000). Opportunistic Strategy involves some degree of planning but deviates from the plan when opportunities arise (Frese, et al, 2000). While there is a certain amount of local planning in the Opportunistic Strategy, it offers the risk of losing sight of goals or letting goals be determined by the opportunities. On the other hand, the Opportunistic Strategy is much more practical. The small business owner needs to be highly responsive to situations that arise and be ready with a plan. This can be achieved by using the opportunities at hand. The best way to plan for legal issues is the combination of Critical Point and Opportunistic Strategies--planning with a clear concept of what is important, combined with a quick reaction to the opportunities (Frese, et al, 2000).

Developing these strategy characteristics to plan the small business and to carry them over to planning for the legal issues the business will face will create a smooth operation of the company in routine matters and head off problems during a crisis. It will also help in achieving the goal of being cost-efficient and cost-effective.

CONCLUSION

The United States is in an economic growth period with small businesses being the foundation of that growth. There are many legal issues facing the small business owner today. All small businesses need the counsel of a general business law attorney, whom the owner believes to be competent, that he or she can work with, and the fees are reasonable. The small business must find the most cost-efficient method and efficient methods of utilizing the legal profession to meet these legal issues. The three basic types of legal representation, in-house counsel, general business counsel, and outside counsel for specific and complex matters, can be utilized in a combination unique for a particular business. The small business must find the optimal combination of these types of representation in order to meet its goal of utilizing legal counsel in a cost-efficient and effective manner. This is accomplished through planning its legal strategies in the same manner that it plans the rest of the business needs.

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Update Legal: http://www.updatelegal.com/legal.asp.

Balasundram Maniam, Sam Houston State University

Hadley Leavell, Sam Houston State University

Brenda Renteria, Sam Houston State University