The definition of a small business can vary greatly. Generally, a small business is a business that is privately owned and operated and has less than five hundred employees. A small business may also be defined by a relatively low volume of sales. 

The standards for a small business in the United States vary by state and industry. Due to their relative ease of operation as well as certain available tax deductions, small businesses are becoming more popular.

Some other reasons why small businesses are becoming more popular may include, but are not limited to:

  • The amount of creative flexibility an owner is allowed;
  • The amount of control over the work-life balance;
  • Financial independence; or
  • Starting incentives, including financing options.

A small business can take the form of a corporation, partnership or sole proprietorship. It may also be known as a startup. A startup business is one that has recently started operating and is on a smaller scale until the business has earned enough revenue to expand.

In some cases, a startup may remain a small business. In other cases, a startup may progress past the criteria for the definition of a small business. 

In manufacturing industries, a small business employs less than five hundred employees. In a non-manufacturing industry, the criteria for a small business is usually less than $7 in annual revenue.

What Type of Lawyer Do You Need to Start a Small Business?

There are different types of attorneys that may be beneficial when starting a small business. These include:

  • Business attorneys;
  • Contract attorneys; and
  • Tax attorneys.

A local attorney will be familiar with what laws apply to local industries and what specific licenses will be required to start a small business in the area.

A business attorney may be the most beneficial type of attorney to consult when starting a small business. This type of attorney is knowledgeable in a variety of topics that will likely apply to a small business. A business attorney will be able to assist an individual starting their own business or are facing a dispute involving their current small business. 

An attorney can help a small business in the following ways:

  • Finding applicable tax breaks for the small business;
  • Identifying special financing for the specific business;
  • Applying for a tax identification number;
  • Providing guidance regarding structuring of the small business in a way that limits liability; and
  • Protecting the intellectual property of the small business.

How Do I Fund My Small Business?

Small businesses can be financed in many ways. The financing is largely influenced by the type of business an individual is starting. Statistics provided by the Office of Advocacy of the United States Small Business Administration state that personal and family savings accounts are the most common source of financing for small businesses.

Other common ways of funding and financing a small business may include:

  • Obtaining a commercial loan;
  • Partnering with an investor or investors;
  • Obtaining a business credit cards from a bank;
  • Applying for a government programs for small business; or
  • Crowdsourcing funds, including through online fundraising platforms.

Government lending programs are available at both the federal and state levels. These programs are intended to reflect the important role that small businesses play in strengthening the American economy. Additionally, they are used to promote the start of new businesses and promote the growth of existing small businesses.

What are Small Business Loans?

A small business loan is a loan that is taken out in order to get a small business started. In some cases, an entrepreneur or investor may have enough funding to start a small business on their own. In many cases, however, an individual starting up a small business may need to take out a small business loan to help get the operation up and running.

A commercial loan is often appealing when an individual is starting a small business because, unlike a venture capitalist, the bank will not attempt to play an active role in the company’s affairs. If the small business owner has a substantial number of personal assets, they should have no problem qualifying for a commercial loan for their business. It is important to note, however, that banks tend to look to past performance instead of a company’s potential. Because of this, it may be more challenging for a startup small business to obtain a commercial loan.

What are Small Business Loan Conflicts?

A legal conflict may sometimes occur in connection with a small business loan. Similar to any other type of loan, disputes between the parties may arise.

In some cases, a dispute arises between the borrower and the lender. There are, however, other parties that can be involved in a loan dispute. These may include:

  • Insurance companies;
  • Government entities; or
  • Other parties.

Examples of small business loan conflicts may include:

  • A dispute over a loan amount,
  • A dispute regarding payment plans;
  • Disputes regarding interest rates;
  • Defaulting on loan payments;
  • Breach of the loan contract terms;
  • Loan fraud; or
  • Other issues that can affect loans, including bankruptcy filings.

Loan conflicts often result in a civil lawsuit. Remedies may include a monetary damages award to compensate the non-breaching party for any financial losses stemming from a violation.

Are There Any Other Financing Options Besides Loans?

A loan is just one option for financing a small business. The funding for operations of a small business may come from other sources. There are many government and private entities that are willing to issue grants to small businesses. These donations are monetary amounts that are donated to the small business.

In many cases, these donations come with strings attached to the grant money. For example, a donor may issue a grant to a small business with the condition that the grant money must be used to research a specific environmental issue. In most cases, a small business grant recipient does not have to pay back the donation so long as they follow the conditions that were attached to the grant.

The Small Business Administration (SBA) is a government organization that may assist individuals in securing loans to get a small business up and running. They do not directly loan money. Instead, they assume the risk of a borrower’s non-payment, which makes private lenders willing to loan money to new business borrowers. 

In order to obtain assistance from the SBA, a small business must show:

  • Conventional financing is not available to the small business on reasonable terms, such as interest rates are too high;
  • That there is a reasonable assurance that the business will be able to repay the loan; and 
  • That the loan is for an appropriate business purpose.

Another funding option for a small business may be a venture capitalist. They may, however, be hesitant to invest in startup small businesses. In many cases, they will invest if they believe in the future prospects for the company. A venture capitalist looks to invest in the company for a short period of time, typically 3 to 5 years. These individuals can be a great source of capital but usually want to play a role in the oversight or management of the company they invest in, which may or may not interest a small business owner.

Do I Need a Lawyer for Help with Small Business Loan Conflicts?

It is essential to have the assistance of an experienced small business attorney for any small business conflicts or issues. Loan arrangements for small businesses may involve complex terms and conditions. A lawyer can help you negotiate or review loan contract terms for your small business loan.

Your attorney can assist you with ensuring your business rights and interests are protected. Additionally, in the event you need to file a legal claim or go to court, your attorney will represent you during any court proceedings.