This unit will cover the following topics:
- Which bodies of law cover ethical considerations when representing small businesses?
- Who is the client?
- Creating the attorney-client relationship
- Accepting ownership interests in the client or client’s business
- Business advice vs. Legal advice
- Serving as a director of the client
- How the attorney’s competence and capacity impact representation.
This Unit discusses the ethical issues and challenges that business attorneys, particularly those who work with start-ups, address regularly. An important question in client representation is “who is the client”? Is the client the entrepreneur who has come to speak with the attorney or is it the actual business that will be created? Once this is answered, how does an attorney structure or create the attorney-client relationship? It is imperative to answer these questions as there are many instances where a conflict of interest can arise.
Entrepreneurs need to use their start-up funding for business expenses, such as product development, marketing, inventory, etc. and do not favor paying attorney fees. Many will ask the attorney to accept an ownership interest in the company. Is this a good idea? There is a rule that covers owning equity in one’s client that must be strictly adhered to if one is going to accept an ownership interest.
Another consideration is discerning between business advice and legal advice. This is important because business advice is not covered by the attorney-client privilege. Often if an attorney serves as a director of their business client, the conversation is mixed between business and legal advice. Additionally, conflicts of interest can arise from holding the dual position of director and attorney. Conflicts can also arise when an attorney holds the dual position of owner and attorney.
Before it closes, this Unit will discuss how an attorney’s competence and capacity impact the representation of entrepreneurs and their businesses.