When hiring an attorney, the entrepreneur should clarify whom the attorney represents. The attorney-client privilege does not protect communications with a lawyer unless the person making the communication is a client. If the client is a corporation, privilege will protect communications made by any company employee to the attorney, if they relate to the employee's duties and are made at the direction of a corporate superior.
An attorney retained to incorporate a company will normally consider the company as the client once the company is incorporated. This should be made clear in the engagement letter with the attorney.
While the company founders may initially be the only representatives of the company, they are usually not considered the client. Thus, if the board of directors later decides to fire the founder, the attorney cannot represent both the founder and the company. Additionally, any communications between the attorney and founder would not be privileged.
Attorneys will often recommend that each founder retain separate counsel from the outset, but in practice this rarely happens because it can be expensive. A founder should retain separate counsel during a dispute or threatened dispute with the company or board of directors.
The privilege only applies to legal advice and not business advice. It does not protect client communications that are made to further a crime or illegal act. For example, a conversation in which a client asked an attorney how to steal a competitor's trade secrets would not be privileged. A client loses the privilege for any communication shared with others or witnessed by outsiders.
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