The Role of an Attorney: Representing the Business or Business Owner?
The realm of business law is a complex and dynamic arena, requiring the expertise of skilled attorneys to navigate its intricacies. One critical question that often arises is whether an attorney should primarily represent the business itself or the business owner. While there is no one-size-fits-all answer to this query, understanding the nuances and considerations surrounding this decision is crucial for both legal practitioners and their clients. This article explores the key factors that influence this choice and examines the potential benefits and drawbacks of representing either the business or the business owner.
The Attorney’s Ethical Duty
Before delving into the specifics, it’s essential to recognize the attorney’s ethical obligation when representing clients. Regardless of whether they are advocating for the business or the business owner, attorneys must uphold the highest standards of professionalism, confidentiality, and loyalty to their clients. Their paramount duty is to act in their clients’ best interests within the boundaries of the law and professional ethics.
Representing the Business
- Focus on Corporate Interests: When an attorney represents the business itself, their primary focus is on safeguarding and advancing the company’s interests. This includes drafting and reviewing contracts, ensuring regulatory compliance, handling litigation, and addressing intellectual property matters. By prioritizing the business, the attorney works to protect its assets and reputation, fostering its growth and sustainability.
- Limited Conflict of Interest: Representing the business directly minimizes potential conflicts of interest. Unlike representing individual business owners, where personal interests may collide with the company’s objectives, an attorney’s loyalty remains unwaveringly directed towards the business’s success.
- Continuity and Stability: Businesses are distinct entities, often outlasting their individual owners. By representing the business, attorneys provide continuity in legal matters, even when there are changes in ownership or management. This ensures that the business’s legal affairs remain consistent and coherent over time.
Representing the Business Owner
- Personalized Legal Guidance: Business owners often face unique challenges and personal stakes in their ventures. By representing the business owner, the attorney can provide personalized legal counsel that takes into account the individual’s goals, concerns, and financial interests. This tailored approach may be particularly beneficial for small businesses or closely held companies.
- Holistic Approach: Attorneys who represent business owners can offer comprehensive legal advice that extends beyond corporate matters. This may involve estate planning, tax optimization, succession planning, and personal liability protection. Such a holistic approach addresses both the business owner’s personal needs and their role in the company.
- Understanding the “Human Element”: When representing business owners, attorneys gain a deeper understanding of the personal investment and emotional attachment individuals have in their enterprises. This empathetic perspective can lead to stronger client-attorney relationships and better legal strategies that align with the business owner’s long-term objectives.
Conclusion
In conclusion, the choice of whether an attorney should represent the business or the business owner depends on various factors, including the size of the company, the individual’s ownership structure, and their unique legal needs. Regardless of the decision, attorneys must uphold their ethical obligations while working diligently to protect and advance their clients’ interests.
In some instances, attorneys may find themselves representing both the business and the business owner, striking a delicate balance to ensure legal compliance and advocate for the best possible outcomes. Regardless of the approach taken, open communication, trust, and a thorough understanding of the client’s objectives are essential for attorneys to provide effective representation and add real value to the businesses they serve.
Video Transcript
Should the Attorney Represent the Business or Business Owner?
So, here is the context: You are a business owner, and you would like to hire a business attorney to help you, but really, to help your business. The attorney says, “I need to identify who is the client. Is the client you as an owner, or is it a business?” And you might say, “Why does it matter?” It matters, not right now, but down the road, for some really important reasons.
Safeguarding Attorney-Client Privilege
Let’s talk about those. Let’s say, for example, that you no longer own the business down the road. Let’s say you sell it, or you no longer own all of it. You bring in another investor or another owner or let’s say, for whatever reason, an ex-spouse gets half or a creditor gets some sort of rights. If the attorney’s fiduciary duties are to the business, in other words, if the attorney represents the business, then the attorney-client privilege is to the business. And business owners generally have access to the communications between the attorney and the business. So that is one important reason: attorney-client privilege.
Addressing the Duty of Loyalty
Here is another important reason: An attorney has a duty of loyalty to a client. There are elements of that duty that exist even after the representation has ended. So let’s say, for example, that an attorney has a fiduciary duty to a business, and then let’s say that down the road, you have a second owner come into the business. You sell half the shares, you bring in an investor because you want to bring in money, whatever the reason may be. Now all of a sudden, your individual interests are not exactly aligned necessarily with the interests of the business. Now, they may be for a while, but let’s say, for example, you start taking money out of your company improperly. When you own the business yourself, that didn’t really matter. You had to make sure the IRS got its fair share of taxes. But aside from that, if you are stealing from your own company, you own the company. It doesn’t matter. But if there is another business owner there now, the question is, is the attorney’s duty of confidentiality, the duty of loyalty, and other ethical duties under state law to you as the business owner or the company as an entity?
Summary
This is such an important issue when there are multiple owners or multiple investors, or whether there are messy issues affecting the company and the business owner has different risks or different interests. So let me tell you how I handle this. I usually prefer to represent the business owner, and the business owner can have me serve the company, but my fiduciary duties are to the business owner. If I were representing the company in a lawsuit, and then later another owner came in, I would have to take a careful look at state ethics rules regarding whether I may need to withdraw. One of the issues is if an attorney represents both an owner and another party, like a business, and there is a conflict of interest between the two, as a general rule, the attorney needs to withdraw from the case.
So, although it might seem really trivial and frivolous to worry about does the attorney represent the business owner or the business, my general approach is for the attorney to represent the owner. So I have very clear duties. I am looking out for the individual, the human, even if those interests at some point conflict with the business.
Conclusion
If you have other questions about things we have discussed or other legal topics or business topics, topics of importance to entrepreneurs, CEOs, and leaders running companies, please feel free to add them into the comment section below. I will use those questions to generate ideas and topics for future live Q&A sessions that you can watch right here.
If you want to be alerted to the next live Q&A, you can subscribe to the YouTube channel and click notifications. You can subscribe to our newsletter to get an email update at aaronhall.com/free. If you follow us on one of the other social media platforms, you may, if the platform allows it, get some sort of update regarding our next live Q&A. I am Aaron Hall, an attorney for business owners and entrepreneurs. This is an educational program so that you can spot issues to discuss with your attorney, avoid common problems in companies, and hopefully enjoy the rewards of a more successful company and life. Thanks for joining today.