Small advisory prac-tices are flush with many things — determination, am-bition and a desire to succeed. What they often lack, but for the lucky few, is money. Sadly, the first task is usually how and where to spend what money they do have. In this demanding environment, where do legal fees fit in?

Remember that many people regard lawyers as the white-collar world’s answer to auto mechanics: people who take an obviously small problem and turn it into something else entirely. So, why bother? Do you really need one?

Yes, you do. Why? Because, as Andrey Pinsky, a likeable pilot whose business law firm, Pinsky Law, is in Toronto, says, “Lawyers provide help in two important areas: taxation and liability.” Taxation changes in regard to the business structure people choose. It continues to surprise Pinsky just how few people consider the consequences of their choice of structure. Many want to start as a corporation, seeking the protection a corporation has by virtue of its status as a separate legal entity. But for the advisor and new small-business owner, starting a corporation is inadvisable as it results in facing double taxation.

Pinsky favours partnerships for growing businesses, and recommends getting a properly drafted partnership agreement — one that can be amended as needed. Yes, that means hiring a lawyer, although some companies have successfully managed to get off the ground without having such an agreement.

Take Lisa Shepherd, founder and principal of Toronto’s successful Mezzanine Business Consulting Inc. She managed to get her company up and running using borrowed documents. (This is something Pinsky warns against, noting that such documents do not offer strong protection.)

While those patchwork agreements were all fine and good during her sole proprietor days, when it came to arrangements such as a shareholder agreement, contracts for services and non-disclosure agreements, she wisely reached out to a lawyer. Did it help? Making Profit magazine’s “50 fastest-growing companies” edition two years in a row is answer enough.

Not only do legally drafted contracts have tailor-made liability protection (the importance of which varies, depending on your line of work), they also add an all-important air of professionalism to business dealings, providing clients with a welcome sense of security. And if done properly, they enable small advisory practices to manage expansion adroitly, including hiring employees (what Pinsky refers to as “opening Pandora’s box”); incorporation; and dealing with sophisticated clientele who might come to the table with their own legal representation.

Shepherd agrees with Pinsky that legal advice is needed prior to incorporation and that it should be an ongoing relationship. Her fellow principal at Mezzanine, Tasha Mazza, agrees that legal advice is needed for growth. In her view, lawyers alone are able to draft clear, flexible documents that can keep pace with a company’s rate of change. She believes it is important to have a lawyer vet important documents, taking a “safety first” approach.

Sound expensive? Well, lawyers do work on billable hours, so take Shepherd’s advice and shop around for someone who won’t bill you for every little thing: “Seek out a good lawyer who will work with you on your own terms. They are out there.”

But when exactly should you get a lawyer? It depends somewhat on the business you are in.

Pinsky, who has several helpful, free, small-business articles on his Web site (www.pinskylaw.ca), lists three stages that he believes definitely need a lawyer: incorporation, growth and winding up the business.

So, unless you are a sole practitioner with no desire to expand, the answer is: now. Any new developments — from taking on partners and hiring staff to offering services and protecting your property — require a lawyer’s supervision.

Doesn’t apply to you? Still sure you are bulletproof behind those boilerplate contracts? What if you get divorced and your ex suddenly owns half your business? What about an injured third party?

If you are less than 100% certain that you have proper protection, get on the phone. If you are a 100% sure, have lunch, maybe a coffee, then get on the phone.

The truth is that, while you need not have a lawyer present in every meeting and can probably survive without having one on speed dial, you should — as Mazza notes — run all major changes by one.

@page_break@Pinsky has one succinct piece of parting advice: “Keep a record of everything. The more paper you have, the less exposed you are.”

That’s good advice. Write it down. IE