I didn’t keep an exact count, but I knew when I’d arrived at my breaking point. The costs and headaches associated with working with firms, which were both disconnected from one another and from the daily operations of my company, were rising. We needed help with matters such as establishing trademarks and drafting and editing partnership contracts (at least four to five per day). Understandably, our legal matters were just one of many to-dos on an outside counsel’s list, which meant that our priority levels and timelines had to be balanced against their other clients’. It seemed clear that an investment in hiring a lawyer in-house would be the most economical and efficient decision.

But before I created an entirely new department, I wanted to check my thinking. My team and I evaluated our legal expectations and gaps and came up with five specific indicators that made the final decision to hire seem like a no-brainer.

If these problems sound familiar to you, then establishing a legal department may be a valuable next step for your business too.

Your turnaround time on legal matters is too slow. 

We were dealing with a significant number of contracts, and the amount of time it took to work and return markups from outside counsel was becoming excessive. Efficiency is critical when it comes to finalizing legal agreements with business partners, and any delay put valuable relationships at risk. A general counsel could exponentially speed up our turnarounds — moving from a phone tag process that could take a few hours to a one-minute casual conversation — and keep our promise of great support and service to our partners.

Legal micromanagement is overshadowing other responsibilities.

Our employees were putting too much effort into managing legal considerations. It was beginning to detract from their primary responsibilities. We needed someone new to help manage legal operations so that non-legal staff could fully commit to their designated obligations again.

Legal consultation is becoming inconvenient.

Because we were so busy getting involved in the fine print of our company’s legal matters, it was becoming easier and easier to write off certain precautions as being unnecessary. Spending valuable time and energy planning for speculated risks didn’t seem to be as important as dealing with the palpable concerns of the present. We needed a more integrated method to streamline our risk analysis and avoid careless mistakes.

You’re lacking a cohesive and company-specific legal plan.

We did not have a definitive legal strategy that was in line with our overarching goals as a company. This was mainly because we were working with third-party sources, who, despite their expertise, weren’t familiar enough with our business to provide the goal-oriented support we needed. Someone integrated with the day-to-day operations and even the company’s in-office personality would be better equipped to give us the counsel we needed.

The financial expenses of working with external firms are building up.

We were faced with an incrementally rising cost of legal assistance from a variety of outside counsels. For the amount of money we were spending on legal advice, we could afford a better return on investment and more specialized support by hiring for an internal role. Bottom line: we did the math. Beyond actual monetary costs, the extras we would get from someone in house — tailored advice, speed and operational improvements — added even more to a general counsel’s worth.

Adding a legal department can be a daunting decision when you’ve been getting by with without one for so long, but if you’re experiencing the perfect storm of challenges like we were, an outside counsel may be the perfect way to clear the air.

Several months after our hiring decision, we’ve seen a noted improvement in the challenges we faced. We’ve become more agile, resourceful and efficient due to the hard work and tenacity of our general counsel. Our turnaround times are faster than ever, our plans are proactively vetted for risks, and we have the opportunity to run our ideas (and our lawyer jokes) by an expert who is just a few steps away.

This scenario seems all too common for a busy startup founder. While many universities provide classes on negotiations or sales, often an entrepreneur is left without training on the actual legalities of running a company. I know I felt that way as we got off the ground. But this lack of education can lead to unintentional — and costly –mistakes.

Don’t Overlook HR

Last year, a former ZocDoc employee sued the company for a culture they believed replicated a college frat house. But why didn’t the employee speak up sooner? Many startups don’t have the right infrastructure to deal with HR infractions and collecting feedback from employees isn’t a priority. Offering employees an open door policy with management and a forum to voice grievances can make all the difference.

Having company policies outlined can prevent confusion and avoid preventable litigation. For instance, as BoardVitals grew, it was important for all members of the team to be on the same page about company policies. In our onboarding guide, we created a central document where employees can learn about sick days, vacation time and company procedures. This sort of guide helps employees get up to speed on company policies and inner workings. From harassment to vacation policies, having pertinent information outlined ensures that both management and staff are on the same page. And in the unfortunate case of workplace malice, an onboarding guide can point everyone in the right direction of where to get help. 

Watch Out for Unintentional Discrimination

Whether you’re conducting an interview or having lunch with a colleague, it’s important to note what constitutes a legitimate question and what’s unacceptable per U.S. law. While many know that it’s illegal to discriminate against age, sex and nationality, it’s not as well-known that it’s also illegal to discriminate against smokers and those who speak English as a second language. You can read up on unintentionally illegal interview questions here.

Learn Local Labor Laws

Each city and state have their own set of labor laws. For instance, each state directs employers exactly when to pay employees. As a company with employees and partners around the U.S., it was crucial for us to ensure compliance right from the beginning. From lunchtime mandates to required medical leave, becoming well-versed in these laws helped keep my business out of trouble with the law, as well as my employees happy.

To avoid paying exorbitant fees and backpay, it’s also important for a founder to get up to speed on payroll withholding for each of their employees. Most states require employers to pay state unemployment, workers compensation, payroll taxes and medicare. The Department of Labor offers a wide range of valuable information on their website. Keep in mind that healthcare mandates kick in at different stages of company growth as well.

Keep an Eye on Government Compliance

Farmers and merchants alike must abide by regulatory statutes applicable to their trades. In the healthcare industry, HIPAA (Health Insurance Portability and Accountability Act) set the precedent for healthcare startups working with secure patient data. Any company now working with protected health information must abide by a set of standards to prevent against fraud and data loss.

As a company in this space, I’ve worked with others struggling with HIPAA compliance. In part, HIPAA is a moving target because you define your policies and procedures, and then implement based on a rubric you’ve developed. It’s not an easy process and can require specific hosting companies and consultants.

In our case, compliance with the ACCME guidelines for offering continuing medical education credits has been a lengthy process. Frequently, we require two independent physicians to audit our content and establish that it’s not influenced by commercial entities.

Whether you’re in healthcare and mandated to provide CME Credits, or in hospitality and need a food handler’s permit, it’s worth looking into your industry’s laws and regulations.

Know the Mandated Employee Benefits

Although you may offer employees three weeks of vacation and health insurance, you might not be giving them their state-mandated benefits. Some of these include sick days, disability insurance and medical leave. Sometimes cities are also involved — we learned that New York City has a form that must be individualized to the employee and sent out. So for us, when a new employee joins we ensure they’re given all New York City-specific paperwork in an initial orientation.

If you have over 50 employees you’re also required to give up to 12 weeks of unpaid, job-protected leave to employees for illnesses and childbirths. For a full overview, I suggest the SBA’s website.

Correctly Classify Your Employees

A San Francisco-based cleaning company was recently forced to cease operations after a series of allegations about the manner in which they classified contractors. While many employers can benefit from contractors, it’s important to note the requirements of the arrangement. This can kill your company, as penalties can be several times annual wages depending on the infraction. If you’re unsure about classification, the IRS has established a set of guidelines to help employers learn the difference between contractors and employees.

From initial entity incorporation to managing payroll, a founder is responsible for every aspect of the company — including compliance with all local, state and national laws. While these tips provide a baseline of advice, you may also want to consult a startup lawyer who can help you audit.

Talk to Your Attorney

As a recent Wall Street Journal article points out, when there’s suspected theft, employers must tread carefully, as a wrong move can open you up to serious legal ramifications. For example, the employee could turn around and sue you for defamation of character or unlawful termination. Before you approach the employee, I recommend seeking the legal advice of an attorney that specializes in employment issues. They can provide you with the best advice on how to discuss the theft and protect yourself from a potential lawsuit.

Take Legal Action if Needed

Regardless of the reason an employee may have committed theft, their employment should be immediately terminated. Contact the police, your lawyer and the company’s insurance firm if needed. You must have proof beyond a shadow of a doubt that they did steal from the company. I once had an employee who when asked to see what was in their bag, wouldn’t show it. Our warehouse camera had footage of him stealing.

It’s important that you send a bold message to the rest of your staff that this kind of behavior is not tolerated in any way. Even if employees need financial help, it doesn’t change the law or company rules. Depending on the situation, I file a police report or, if it’s a considerable theft or fraud, begin paperwork for a lawsuit. As unfortunate as it was, I’ve had to do this with two former employees.

Minimize Room for Theft 

In order to ensure that there is as little room for theft in your organization as possible, keep a close eye on financials for anything that doesn’t seem to add up in terms of an increase in office supplies expenses or discrepancies in the revenue. I can never be too busy to not pay attention to whether there are more fingers in the pie than should be.

You should also ensure that employees are well-paid to begin with. Run background checks, and provide an open-door policy for anyone to talk to you before they reach the point of feeling like they have to steal. I want to ensure my staff is happy, and if they aren’t, what can I do to change that for them? This might include helping to cover the cost of therapy or a treatment facility that can turn their life around.

Take the Same Precaution With Everyone 

While I do run background checks, a person’s past is not always a reason to stop me from hiring a talented individual. People make mistakes and they deserve another chance. If I do hire someone who has stolen in the past, they are observed just as much as any other employee and have the same result if they do steal from my company.

It’s an awful moment when you realize that someone stole from you, especially if it’s someone you trusted. However, you should deal with it quickly and efficiently so that others see that this is not tolerated. While it rarely happens in most companies, it’s important that everyone knows there are no second chances when it comes to stealing.

As an attorney, I’m familiar with these slip-and-fall cases. While they’re certainly the best-known instances of premises liability, they’re hardly the only ones. As a business owner, your responsibility for others’ injuries is far-reaching, covering everyone from employees to visitors to your next-door neighbor.

I’ve come across too many people who know it’s important to keep their employees and customers safe but aren’t aware of the full extent of their culpability. A better understanding of premises liability can not only reveal ways to improve workplace safety, but it can also help you avoid becoming the next case study for a personal injury ad.

Premises Liability 101

Regardless of whether you rent or own the building your business is located in, you’re responsible for whoever steps inside — from employees and customers to vendors and solicitors. Even trespassers have limited protection under premises liability law.

While your landlord may be sued for negligence in some instances, you will almost always shoulder the primary burden. In fact, most landlords include clauses in rental agreements that require tenants to assume full responsibility when it comes to maintaining the safety of the property. That means that if your landlord is sued, your business is on the hook for the incurred expenses.

Slip-and-fall incidents are just the tip of the iceberg. Many different scenarios fall under the umbrella of premises liability, including a visitor or an employee assaulting another visitor, a piece of equipment or merchandise injuring someone, or hazardous substances running off your property and onto a neighboring property. Basically, if you could have taken steps to prevent an injury or damage from occurring, you’re going to be held accountable by an attorney like myself.

On top of that, if you decide to fight a premises liability suit, your business will be affected in more ways than one. While most commercial general liability insurance policies will cover many of the expenses of a premises liability lawsuit, lawyers’ fees alone can be exorbitantly expensive. And no insurance policy will be able to repair the damage to your business’s reputation.

How to Keep Everyone Safe (and Avoid Lawsuits)

Unfortunately, accidents will always happen, and lawsuits will always be filed. At a minimum, consider buying a basic commercial general liability insurance policy. For as little as $500, a standard policy will cover up to $1 million. In the long run, it could end up saving you tens of thousands of dollars.

After you get insurance, here are some best practices to prevent most workplace injuries and expensive liability claims:

1. Inspect. You and your employees need to diligently monitor potentially unsafe conditions — in both individual workspaces and the property at large. Constant vigilance might sound like a productivity killer, but all it really means is being more aware of your surroundings. This way, any potential liabilities can be detected before employees or customers discover them the hard way.
2. Correct. If an unsafe condition is discovered (or even suspected), it must be corrected immediately. Neither you nor your employees should assume that someone else will clean up the spill, flatten the entryway mat, or clear ice and snow off the walkway. Establish clear policies and procedures so your employees know what to do when it comes to dangerous conditions.
3. Warn. If any unsafe conditions can’t be corrected immediately, you need to display a conspicuous warning sign so customers and employees can avoid the hazard until it’s fixed. The prominent use of “wet floor” signs in areas that have been mopped during business hours is a good example of a prudent warning.

When it comes to premises liability, the bottom line is this: If it’s your business, it’s your responsibility. Stay alert for potential dangers, and correct problems as soon as they crop up. That will hopefully be enough to keep you out of court.

DISCLOSURE: This material is provided for general and educational purposes only and is not intended to provide legal advice or to avoid penalties that may be imposed by U.S. law. Contact your attorney or other advisor regarding your specific situation.

Here are the top five reasons you may want to change your company from a Limited Liability Company to a corporation:

1. You want to raise money from VCs. Venture capitalists want to invest in Delaware C-Corps. C-Corps allow investors to create “preferred shares” of stock and provide a consistent legal structure across their portfolios. Some VCs also manage public funds, which are often restricted from investing in LLCs.
2. You want to join a startup accelerator. Accelerators or incubators that take equity often require their participants be incorporated as a corporation. Corporations are comprised of shares of stock, which makes it easy to calculate and distribute equity. Additionally, many accelerators view a corporation as an investment-ready vehicle and a symbol of business acumen.
3. You want to give equity to your employees. In a corporation, it is easy to place shares of stock that the company can later distribute to employees in reserve. In an LLC, the members own 100 percent of the company. In order to give equity to a new member, the members must sell a portion of their personal ownership stake to the new member. This personal sale of securities could trigger capital gains tax and create other complications.
4. You want to issue equity on a vesting schedule. It is relatively easy to issue shares from a corporation that is earned over time on a vesting schedule. In contrast, because there are no shares of stock in an LLC, members usually elect to distribute profit interests. However, defining and calculating those profit interests is an expensive endeavor that requires constant monitoring of member capital accounts.
5. You want to follow best practices. Startups should position themselves to easily accept funding and retain top employees. While it may make sense in some situations to veer off the typical path, doing so usually requires explanation. Founders who want to present themselves as in-line with industry practices seek out corporations.

The process for converting from an LLC to a corporation depends on the state in which you originally formed your LLC. Some states (like Calif.) have a fast-track conversion statute that specifically allows for a domestic LLC to convert to a foreign (out of state) corporation. In other states, a conversion may actually require a merger. In both cases, be sure to consult with a tax expert. You want to consider all tax issues prior to drafting your conversion or merger plan.

Disclaimer: This article discusses general legal issues, but it does not constitute legal advice. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

Tucker Cottingham co-authored.