Wednesday, July 19, 2017

Making Friends with Entrepreneurs

Last year, I was asked to contribute to a symposium on law and entrepreneurship hosted at the University of North Carolina.  Although I had to Skype in for my presentation from Little Rock, Arkansas (where I had just given a separate, unrelated CLE presentation), the panel to which I was assigned was fabulous.  Great scholars, with great ideas.

For my contribution to the symposium, I chose to reflect on the unfulfilled promise of the potentially mutually beneficial relationship between an entrepreneur and a business finance lawyer.  I recently posted the published work memorializing my thoughts on the topic, featured this spring with several other articles from the symposium in a dedicated edition of the North Carolina Law Review.  The brief abstract for my article follows:

Entrepreneurs have the capacity to add value to the economy and the community. Business lawyers—including business finance lawyers—want to help entrepreneurs achieve their objectives. Despite incentives to a symbiotic relationship, however, entrepreneurs and business finance lawyers are not always the best of friends. This Article offers several approaches to bridging this gap between entrepreneurs and business finance lawyers.

My hope in writing this article was to infuse some energy into conversations about the role of business finance and business finance lawyers in the start-up and small business environment.  Too many principals of emergent businesses with whom I interact think that business entity choice and formation are divorced--wholly or in major part--from finance.  Of course, governance and tax matters (as well as, e.g., intellectual property and employment law concerns) are key.  But my personal view is that entrepreneurs and promoters of new businesses should map out their plan for financing firms from the start and take that plan into account in choosing the form of legal entity for those businesses.  I may be fighting an uphill battle on this (for a variety of reasons, mostly relating to the limited resource environment in which start-ups and small businesses exist), but I hope the article gives both clients and lawyers in this space something to consider, at the very least.

Corporate Finance, Entrepreneurship, Joan Heminway, Lawyering, Securities Regulation | Permalink


I really appreciate that you have addressed this topic. The greatest advantage I gained by joining the legal community was the ability to locate and access subject matter legal expertise. BTW: Alex Davie posted a useful article on his blog today concerning the newer and often more flexible means of capitalization.

The difficulties of neophyte entrepreneurs and start-up promoters is that they do well to formally commit to a business plan (which I typically request from a new client) much less consider seeking out professional expertise. Having a business that was started and located in a rural area, tax and finance legal expertise was limited in scope and, my experience was, rural counsel have no professional relationship with colleagues whose practice areas are so foreign from their own. In rural areas, some start-ups turn to the attorney who handled their land partition, probated their parent’s estate, handled their divorce proceeding or represented them at their DUI hearing. In fact, I see similar evidence of this in Nashville.

The entrepreneur who invests in investigating the means, method, and financing of a start-up is, in my view, rare indeed. Most neophyte entrepreneurs and start-up promoters tend to be so confident (and it requires confidence) in themselves, they “self-help.”

I sought out my tax specialization because, quite frankly, entrepreneurs have heard or experienced the horror stories of dealing with taxing authorities and that becomes the priority because they usually know how to make or provide the service or widget, sell the service or widget and collect for the service or widget. They usually start their business on a “shoe string” and – other than for tax purposes – “self help” themselves throughout the process. Thus, when it comes to solving a number of their problems, the remediation includes having to “do battle” with their long-term and often, trusted, CPA.

Thus, the attorney often tends to “comes to the table last” because something has gone awry. Further, it is my opinion that CPA’s generally approach tax law from a different vantage. They don’t generally think like lawyers. I do not decry “self-help” in formations because that usually constitutes very large legal fees when it comes time to “clean up the mess.”

I have observed UT making real efforts to reach out into the business community by holding various roundtables. The only way I envision that this educational gap is going to be filled is partnering with local chambers of commerce where entrepreneurs will reach out for free advice.

Posted by: Tom N | Jul 20, 2017 7:29:03 AM

Thanks for these thoughts, Tom N. My experiences have been similar to yours both in Massachusetts and Tennessee. Lawyers here in Tennessee are working toward closing these gaps, as I suspect they are elsewhere. And yes, I also believe that Chambers of Commerce are a great link. The Knoxville Entrepreneur Center is associated with our Chamber, and I sincerely hope that our relations with both of them get better and closer over time. Also, the Tennessee Bar Association is reaching out to entrepreneurs with free information sessions--Business Bootcamps--across the state. Every avenue that leads to more and better business law advice to these business generators should be explored.

Posted by: joanheminway | Jul 20, 2017 7:38:28 AM

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