Although there are many other priorities for a startup’s limited time and resources, spending the right amount of money on the right lawyer is essential.
Does A Startup Company Really Need A Lawyer?
All startups have two possible outcomes – they either fail or they succeed.
Each of these outcomes raise dramatically different legal issues. On one hand, if a startup fails, the startup company and its principals want to minimize or ideally avoid any liability that may result. Effective risk avoidance is the domain of lawyers.
On the other hand, if a startup company succeeds, the startup and its principal want to pay as little as possible in taxes and be paid as much as possible as a result of that success. Again, this is the type of counsel that lawyers regularly provide.
Investors use lawyers to maximize their share of the success and to protect themselves from liability. Startups and their principals should do the same.
What About Using Forms?
LegalZoom, Rocket Lawyer and similar companies provide a variety of accessible and inexpensive forms. Used correctly, they can reduce a startup company’s legal expenses.
But those forms don’t help with everything, such as tax advice in deciding what type of entity to form, counseling what financing terms are customary, and navigating critical issues like equity and intellectual property. Knowing how to employ those forms to their best advantage is part of the value provided by experienced lawyers.
Much is made of the “standard” terms sheets and forms prepared by incubators like Y Combinator. These forms are usually short to “reduce friction.” These forms have inherent biases that disadvantage startups. An experienced startup attorney knows where those biases are and can, if possible, correct those biases.
So How I Choose the “Right” Lawyer?
In many ways, choosing a lawyer is similar to choosing any professional and requires some investigation. You should be comfortable with him or her and his or her ability to meet your company’s needs and to minimize its exposure.
Selecting the attorney right for you and your startup begins with gaining an understanding of his or her experience and knowledge. Good startup lawyers must master or at least be conversant in a wide range of legal disciplines, such as corporate law, securities law, tax law, real estate, intellectual property law, employment law, litigation, and employee benefits law. Ideally, the lawyer also knows something about the startup’s industry. As one lawyer cannot be an expert in all of these fields, you might want to consider retaining an attorney, who is part of a firm and can tap the expertise of legal colleagues, or a lawyer who otherwise can access to the necessary expertise.
And don’t even think of hiring your college roommate or a family friend unless he or she meets these criteria. Retaining an attorney with experience working in startups is critical. You do not want your legal counsel learning at your expense. You can, however, use friends and family to recommend a lawyer or help you find an attorney who regularly represents startups.
Paying the “Right” Amount
Whether a startup is bootstrapped, angel-funded, crowdfunded, or secured some level of series funding, budgeting appropriately for legal services is always a concern. This is even more critical when funds are limited. The “right” lawyer for your startup understands that.
Many lawyers serving startups charge a fixed rate for the first or even early stages of financing. The right lawyer for you also ensures you are clear about when you will and won’t be charged for his or her time.
Cost is not the only factor to consider. You do not want a lawyer who is inexpensive because he or she lacks experience, confidence or competence. In that case, you will be overpaying regardless of how little you spend. Conversely, paying a lot does not guarantee your lawyer is qualified or accessible.
Hiring the right lawyer takes time and thought. Doing your due diligence is likely to result in you and your company gaining another trusted advisor to help you build your company.
About Culhane Meadows – Big Law for the New Economy®
The largest woman-owned, full-service, national law firm in the U.S., Culhane Meadows (www.culhanemeadows.com) fields more than 60 partners in ten major business markets across the country. Uniquely structured, Culhane Meadows’ cloud-based Disruptive Law® business model gives attorneys greater work-life flexibility while delivering outstanding, partner-level legal services to major corporations and emerging companies across industry sectors more efficiently and cost-effectively than conventional law firms. Clients enjoy exceptional and highly-efficient legal services provided exclusively by partner-level attorneys with significant experience and training from large law firms or in-house legal departments of respected corporations. U.S. News & World Report has named Culhane Meadows among the country’s “Best Law Firms” in its 2014 through 2019 rankings, and many of the firm’s partners are regularly recognized in Chambers, Super Lawyers, Best Lawyers, and with AV Preeminent ratings in Martindale-Hubbell Peer Reviews.