Does your start up need a lawyer? Three considerations to keep in mind
Typically, when business owners start up a new company, the founder(s) begin on a bootstrapped budget of their own cash, and less likely, small seed round from friends and family, and if they are lucky, an angel investor. Founders are full of dreams and aspirations for their new business, they set up an idea, the tech behind their idea, and marketing objectives—and they intend to put every single dollar back into marketing to scale growth. And, the question arises, is this is a good time to consult a business lawyer? Most businesses attempt to skate by without legal help. However, I submit to you that that not getting a lawyer to help you from the outset is like building a house without a solid foundation—the bricks will begin to crumble at some point. Simply put, the “right” lawyer will help you manage risk. I understand that lawyers are expensive and the entire legal process can be daunting and intimidating, but waiting too long results in further risk management issues down the line that could have been nipped at the bud. And, yes, the traditional “white-shoe” and large law firms tend to be intimidating and expensive (yes, I worked at a “white shoe” firm too)—but you may be able to locate solid outside general counsels for your company to manage your internal legal function at a fraction of the cost of hiring a traditional “hourly” lawyer. At this point, you’re probably thinking, let me speak to my cousin’s friend, or my neighbor’s relative that has been the family lawyer for so long, who may have gotten uncle Jim a big settlement in the past for a personal injury matter—but while that may be a place to start, that’s not the end of it. You really need to find yourself the lawyer that actually practices in this space, instead of going to a personal injury lawyer to counsel and assist on shareholder matters, employment function or corporate governance—this is like going to a dermatologist to treat your heart condition (yes, both medical doctors —but specializations in different fields).
So, what can a start-up business lawyer do? Here are three big areas, and this only hits the surface.
1) They counsel and help prepare shareholder, collaboration or such other agreements that will help the founders set forth the terms and conditions that will govern their business relationship. Some of you reading this are probably saying, but the co-founder is my best friend—I don’t need this—but I submit to you that’s a horrible idea because contracts do not exist to protect someone when everything is going right and everyone is making money, but instead when there is a dispute and things are falling apart. Starting a business is akin to getting married—yes, everything is great under the altar, but conflicts do arise (eventually, no matter how small)—the question is, how are you going to deal with the conflict? What protections do you have? Not surprisingly, in my experience the founders that did NOT have some type of agreement spend more money during the “business divorce” than the ones that do—because, if litigated, you have to spend more money in proving the existence of some type of agreement or “meeting of the minds.”
2) If you are starting to do business with other vendors or third parties, you may need Master Services Agreements, Confidentiality Agreements to protect your trade secrets and other information, and may wish to begin protecting your trademarks, copyrights, and in some cases, patents.
3) Your Company will only be as good as the team that you build around you. This, in many cases, will result in hiring employees. The lawyer can help you manage your risk, help set up the employment practices from Employment Agreements, including non-solicit, non-compete, and confidentiality provisions, among others, Employment Policies and Procedures, helping differentiate between which employees may be exempt vs. non-exempt for overtime calculations, I-9 compliance, and even help you differentiate between independent contractors vs. employees (not everyone gets this last one right).
Fortunately for many millennials looking to start businesses, there are tons of reviews on lawyers available on the web so you can start the vetting process!