Hiring a Business Lawyer: 6 Questions That Match the Lawyer to the Problem

Most business owners hire the lawyer they already know, and for a company in financial trouble that is frequently the wrong one. The attorney who formed the LLC and reviewed the office lease may be excellent at both. Neither task resembles answering a funder's lawsuit, negotiating with a secured lender, or deciding whether the company belongs in bankruptcy, and the words "business lawyer" cover all of them without distinguishing any.

The six questions below sort the problem before the lawyer is chosen. They are phrased as a client might put them in a first meeting, and each has an answer that narrows the field.

1. The First Question Is Whether the Problem Is a Deal or a Dispute

Corporate and transactional lawyers build things: entities, contracts, financings, acquisitions. Commercial litigators take things apart in court, and their work runs on pleadings, deadlines, and discovery. Collections counsel sits between the two, pursuing money owed to a business or defending a business from a creditor's collection effort. A single firm may house all three.

A business with a signed contract it wants enforced needs a litigator. A business asking whether to sign a new financing agreement needs a transactional lawyer, and ideally one who has read agreements of that type before. The mistake is hiring for the relationship rather than the task.

The distinction matters because a corporation or LLC that is sued cannot represent itself. An artificial entity appears in federal court only through licensed counsel, as the Supreme Court restated in Rowland v. California Men's Colony, so the owner who intended to handle a lawsuit personally discovers, at the first appearance, that the choice was never available.

2. The Second Is Whether the Company Can Still Pay Its Debts

Insolvency changes the specialty. A company that cannot meet its obligations as they come due may need a bankruptcy lawyer, and the Bankruptcy Code places conditions on who that lawyer can be. Under 11 U.S.C. 327(a), a debtor in possession may employ only professionals who hold no interest adverse to the estate and who are disinterested, and section 101(14) excludes, among others, anyone who was a director, officer, or employee of the debtor within the two years before filing.

The company's general counsel who also served as its secretary may be disqualified by that clause alone. A longtime outside lawyer who is owed unpaid fees is a creditor, which raises the same problem from another direction (Subchapter V relaxes it for pre-filing claims under $10,000, a detail that matters more to small companies than its size suggests, since a small company's corporate lawyer is exactly the person likely to be owed a modest sum at the moment of crisis).

A bankruptcy specialist can often be identified by credential. The American Board of Certification certifies attorneys in business bankruptcy, consumer bankruptcy, and creditors' rights under a program accredited by the American Bar Association, with requirements that include a minimum share of practice time devoted to bankruptcy law and a written examination. Certification is evidence of concentration. It is not a guarantee of judgment, and many capable bankruptcy lawyers hold no certificate.

3. The Third Is Who the Client Will Be

A lawyer hired by a company represents the company, acting through the people authorized to direct it. That is the rule of ABA Model Rule 1.13, and it has a consequence owners tend to overlook: when the owner has personally guaranteed a merchant cash advance or a bank loan, the owner's interests and the company's may part ways. The company's lawyer may, in some cases, represent the owner too, but only if the conflict rules permit it, and the owner should ask the question directly before assuming the answer.

4. The Fourth Is Whether the Lawyer Has a Conflict

New York's Rule 1.7 bars a lawyer from representing a client when a reasonable lawyer would conclude that the representation involves differing interests, or that the lawyer's own financial or business interests pose a significant risk to the lawyer's judgment, unless the conditions for consent are met, including informed consent confirmed in writing. For a business in debt, the practical version is short: whether the firm represents the funder, the bank, or the landlord. The owner should name those parties in the first call, so the check is run against them and not against a vague description of the dispute.

And the consultation itself is protected. Under New York's Rule 1.18, a person who consults a lawyer about possibly forming a client relationship is a prospective client, and even if no engagement follows, the lawyer may not use or reveal what was learned except as the rules permit. An owner can speak candidly in a first meeting with a firm that turns out to be conflicted. Whether that protection is enough to justify telling a stranger everything in the first hour is a judgment each owner makes alone.

5. The Fifth Is What the Engagement Excludes

A lawyer hired to answer a complaint has not necessarily been hired to negotiate a settlement, pursue a counterclaim, or advise on the owner's guaranty. Rule 1.2(c) permits a limited engagement when the limitation is reasonable and the client gives informed consent. The engagement letter should say what is included, and the owner should read it for what is not.

6. The Last Is Which Deadline Arrives First

The order in which a troubled business hires its specialists is set, in many cases, by the calendar. In New York state court, CPLR 320(a) requires an appearance within twenty days after service of the summons, or within thirty days after service is complete for certain other methods of service, and a missed appearance can lead to a default. That deadline makes a litigator the first call, whatever else is happening.

Without a pending suit, the sequence has more room. An owner might first establish, with a financial review, what the business can afford to pay and to whom, then decide whether negotiation, restructuring, or a bankruptcy filing fits. The lawyer comes in at the point where the problem acquires a legal edge, which is sometimes the first week and sometimes, to put it more accurately, the week the first payment is missed.

Consumer debt collection law will not supply the missing protection. The federal Fair Debt Collection Practices Act defines a debt by reference to personal, family, or household purposes, and a business obligation falls outside it.

Before the Lawyer, or Beside One

Delancey Street, not a law firm, occupies one narrow place in that sequence and makes no claim to the others. Its free, confidential first review looks at merchant cash advance obligations and asks whether a negotiated settlement is realistic, and when a question becomes legal the company works with independently licensed attorneys. A business that has been served, that needs the automatic stay, or whose owner faces a claim of fraud should hire counsel first. For the rest, the choice of lawyer improves once the problem has a name.