Myths About Legal Myths

Everyone online is a legal expert.  You didn’t know that?  The World Wide Web is filled with great information but not all the information out there is 100% accurate.  Some of these inaccuracies are due to word limits, different jurisdictions, and different experiences.  I recently read an article that was about 10 legal myths that was a perfect example of this.

Steve Tobak was the author of the article that broke down these legal myths.  Tobak is not a lawyer but rather is a management consultant, executive coach, and former senior executive of the technology industry.  While I agree with most of what Tobak had to say there were a few of his myths that I cannot get completely on board with.

“Business entities protect your personal assets.”

Tobak describes how business entities do not protect personal assets because the corporate veil can be pierced.  While it is true that the corporate veil can be pierced and you can be personally liable, this can be extremely difficult as long as you follow the appropriate steps that create a separation between you personally and your business.  These steps include keeping up with your corporate books, treating your business its own entity, and dotting the ”I’s” and crossing your “T’s” with the appropriate documents.  So while your business entity does not grant you full immunity from everything, if the appropriate actions are taken your personal assets with be safe.

“The best contracts are full of mind-numbingly complicated legalese.”

While I agree with this statement, Tobak seems to indicate in his explanation that an attorney might not be necessary for your business contracts to be sound documents.  My favorite thing that I hear from clients when I present them with a contract I drafted is “I would have never thought to put that in there.” That is what an attorney brings to the table when it comes to drafting a contract.  They have the experience to know what provisions can be included in your agreement that help protect your rights and interests. They also have the knowledge of what needs to be included in those contracts in order to limit the potential litigation issues.  In Tobak’s defense he does suggest taking a contract you have drafted to an attorney to review before executing it.

“You can’t be sued for a crime you didn’t commit.”

While I cannot speak for other jurisdictions, Michigan does have laws that protect businesses from frivolous lawsuits.  Michigan Court Rule 2.114 specifically states that documents that are filed with the court that are frivolous or only meant to increase the cost of litigation will subject the filing party to court sanctions.  This does not mean that Tobak was incorrect in stating anyone can sue you for anything.  It does mean that there has to be at least some substance to what you are being sued for. If there is no evidence of anything, then there might be grounds for penalties for bringing a frivolous action.

“Attorneys are a necessary evil to use as a last resort.”

This is one of the myths that I completely agree with Tobak on.  An experienced Grand Rapids business attorney can be invaluable.  Not only can they save you thousands of dollars for the few hundred dollars you have to pay them up front but their experience can greatly benefit your business strategy and planning.  It does amaze me how many businesses contact me after it’s too late.  Instead of protecting those businesses, I am thrust into a position of trying to limit the damage.  And the kicker to that is not only do these clients have to pay for those services but they still need to protect themselves going forward so a similar situation does not arise.

Tobak brings up a lot of good points to consider and these should be things that ever West Michigan small business owner or entrepreneur should have on their minds when they talk with an attorney.  You can ask that attorney what things can be done in order to best protect your business because you have this information.

Source: “Be as Sharp as Your Lawyer: 10 Legal Myths” by Steve Tobak of Inc.com