The Lawyer as a Business Ally

Albert Einstein said “The crisis can be a real blessing to any person, to any nation. For all crises bring progress. Creativity is born from anguish. Just like the day is born form the dark night. It’s in crisis that inventiveness is born, as well as discoveries, and big strategies. …. It’s in the crisis where we can show the very best in us. The only true danger that crisis represents is the tragedy of not being willing to overcome it.”
Einstein’s words could not be more relevant today, when the world economy has succumbed to a serious malaise. The impasse we are facing is difficult, but it is precisely for that reason that we cannot allow ourselves to despair. To engender renewed market vigor, the entrepreneur must use the crisis to find his own courage and creativity, to find again that instinctive longing for personal affirmation that Marx called the entrepreneur’s animal spirit. Only one who is able to defy the crisis and come face to face with it, combining strength and a precisely targeted strategy directed at opening new horizons to his business, will be among those who emerge from the crisis as victors.
Investing abroad does not mean abandoning Italy; it means expanding Italy’s sphere of influence, economy and culture, thereby eclipsing the old, tired cliché of the lazy and incompetent Italian, and showing the face of a new Italy that complements its traditional creativity with a renewed competence, efficiency and professionalism.
The need to find new markets has to contend with the current saturation in European markets and the uncertainties of emerging markets. In such an environment, only the United States offers a solid and growing economy, with a vast market, unparalleled resources and an entrepreneur-friendly environment. That very same economic potential, however, carries with it some difficult challenges. The US market is based upon very different customs and rules than those prevailing in Europe, and it is essential that the entrepreneur approach a U.S. entry with the help of experienced and competent professionals who can guide him in evaluating each opportunity, not with improvisation and naïveté, but with lucid and knowledgeable expertise.
The role of the legal consultant counts as one of the crucial differences between the two systems. Italian culture associates lawyers with the need to address “pathologies” suffered by an enterprise or as a mere tool to solve technical difficulties. The US entrepreneurial culture, on the other hand, has long since understood the need to involve legal consultants in the preliminary stages. Bringing lawyers in when the enterprise is being organized or when commercial relationships are being established serves to prevent problems rather than cure them after they have surfaced; lawyers are expected to examine the business model and to advise from the inception what strategy will achieve optimal results. In the US, the trusted legal advisor is one of the “business cards” of the enterprise; a business representative who shows up at the negotiating table without a lawyer is a rare thing and looked at askance.
In the past, the Italian entrepreneur faced the market in an “artisanal” way, without consulting proper advisors, partially in order to “save money”. Instead, as it turned out, those initial “savings” often cost the entrepreneur dearly because he realized too late that the erroneous decisions taken without such advice could not be reversed, and that he had unwittingly created undesired liabilities – tax, commercial or regulatory – often for the Italian holding company. Having expert legal advice from the outset allows the entrepreneur to minimize investment risks and maximize profits.
Nothing gives greater satisfaction to a lawyer than to witness his client’s success. Each professional is proud to represent entrepreneurs who become part of today’s economic history by defying the crisis and creating new perspectives and developing new strategic alliances. It is crucial for the professional to be able to create a mutual understanding, a certain “- so to say- “chemistry” with his client. A good lawyer knows that it is the client who makes the decisions, but that he exerts a strong influence on such decision in the interest of his client. Furthermore, during tense negotiations the kind of relationship established with the counterparty’s lawyer has often decisive effects on the negotiation.
While solid technical competence is essential to a lawyer, it is no longer sufficient in and of itself. The legal profession is an ancient one, closer to an art than to a science. An expert lawyer knows he cannot be a mathematician who can offer only one correct answer to a question. Legal issues are not precise logarithms but there are a variety of strategies that can be employed to overcome – or to complicate – problems. At the inception of a business, the attorney needs to leave aside the more technical aspects of his knowledge and concentrate on the strategic synergy with his client to achieve the desired results. Only after establishing a solid basis for a commercial relationship can a lawyer apply his knowledge to achieve the advisable contractual conditions. A successful professional finds his highest realization in contributing to his client’s success, and when his own clients recognize it, he attains his greatest professional satisfaction.
Experience teaches that the overly technical and precise application of the law, not only does not help the client per se, but often creates obstacles to reaching the desired result. Being excessively focused and inflexible in negotiating the perfect terms for a client’s contract can lead to the failure of a negotiation that, whilst perhaps producing a less than legally perfect result, could have had commercial success. To follow the entrepreneur in each phase of his project and to become an integral part of solid contractual relationships destined to succeed in time should always be the lawyer’s goal. Legal documents should be a means to attain a desired result; not a vehicle to showcase the lawyer’s baggage of tricks.
Helping the client to reach its goals requires the application of a wide range of skills that must be used in tandem, in masterly fashion, and differently in each phase of the project. Among the most important are negotiating ability; psychological intuition; capacity to assess and anticipate the counterparty’s leverage and flexibility; keenness in identifying the hidden agenda of the counterparty; willingness to set aside one’s ego for the good of the client; ability to assume a negative negotiating style to advance the client’s objectives (the so called “good-cop/bad-cop” tactic); capacity to establish a collaborative relationship with the counterparty’s lawyer; and capacity to rein in the client when his enthusiasm prevents him from recognizing undesired risks.
The most thrilling aspect of the legal profession is to participate in the strategic definition of the goals at the client’s side and the synergetic enactment of such tactics. A crucial part of the professionalism of an international lawyer is to be able to function as a cultural and legal translator. That enables the client to avoid misunderstandings and typical pitfalls, and often to foresee and to resolve in advance the counterparty’s skepticism, providing reassuring information and finding atypical creative solutions to each problem. It is easy to see a problem; the challenge is to find its solution! In order to act in that capacity, it is indispensable to establish a relationship of total trust with one’s client who needs to feel comfortable enough to allow his lawyer to take him by the hand and lead him safely to a successful outcome.
Setting up a local subsidiary corporation, which is a valuable instrument to protect the holding company from limitless liability, tends to frighten the foreign investor who is testing the US market for the first time. The truth is that the organizational costs are minimal; the management of the corporation can be made easy and efficient; the shareholders need not obtain visas or be present in the US; the managers need not travel here each time resolutions must be adopted; and the capitalization requirements are practically non-existent from a legal point of view. An important aspect of setting-up a local subsidiary is also the protection offered to the assets of the foreign holding company and the insulation it affords for tax purposes (Branch profit tax) based upon their finding of it being Engaged in Trade or Business in the USA (“ETB”) and thus producing Effectively Connected Income (“ECI”) taxable in the US.
Making a prudent initial investment in in the engagement of expert legal advice will enable the enterprise to protect itself from unnecessary liabilities and to take advantage of US tax rules that are much more entrepreneur-friendly. In addition to the legal advantages, there are also ancillary fringe benefits which are noteworthy. A local presence, via the organization of a US subsidiary and the acquisition of a local address (which could be c/o the legal advisor), projects an image of seriousness and stability, and inspires greater confidence and trust, thus facilitating ensuing negotiations.

by Annie Fiorilla

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