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Everything You Need to Know About Being In-House Counsel for a Startup Company

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Being in-house counsel for a startup venture is a unique and demanding task for an attorney. You will quickly learn that the role is somewhat unique from that of an in-house counsel of a larger business. Read the law trades blog to inform yourself further about in-house counsel.

What is the role of in-house counsel?

In-house counsel generally provides three services to the employer — advisor, professional client, and service provider. The in-house counsel will advise the employer on any legal matters affecting the business. She is the legal face of the company the dealing with outsiders on legal matters. This includes responding to legal inquiries, handling legal complaints, and hiring and overseeing outside counsel when necessary. She will also perform many professional services to the business, such as contract review and drafting, regulatory compliance, employment contracts, etc.

How is the in-house counsel’s role in a startup unique?

The in-house counsel works very closely with the startup entrepreneurs. She must be very flexible and will to wear additional hats. She will be asked to assist with or handle all sorts of things that are legal and non-legal in nature. The attorney will quickly need to become versed in business operations, marketing, sales, finance, accounting, etc.

In a traditional, in-house position, the legal functions an attorney addresses are somewhat routine. In a startup, the most common questions are, “Is it legal for us to do this?” and “How can we do this legally?”. Most importantly, the attorney needs to understand the objectives of the entrepreneurs. Attorneys have a tendency to say “no”. In a startup, the attorney is asked to figure out how to say, “yes”.

What are the most common legal service that a startup needs?

LawTrades provides services related to the most common in-house legal services for a startup, as follows:

Intellectual property (IP) – The majority of startup businesses (as opposed to lifestyle businesses) are technology-based. In this case, IP rights are critical to the venture. The attorney should be familiar with patent and trademark law. This includes securing IP rights, protecting those rights against infringement, and licensing of IP rights.

Employment law – The startup will need to provide extensive advice (and potentially contract drafting) when hiring, firing, and establishing compensation for employees and independent contractors. It may be necessary for the counsel to identify and hire professional service providers for specific legal tasks.

Business Governance – Most startups organize as a corporation to meet the unique operational and financial demands of owners. The attorney will thus manage the corporate governance process. This includes holding meetings, complying with disclosure and voting rules, record maintenance, and regulatory reporting (if applicable).

Business Transactions – Startup funds are generally involved in equity and debt financing deals. The objective of most startups is to be acquired, merge with another firm, or go through an initial public offering. The in-house counsel will be a chief advisor during these transactions.

Contracting – In-house counsel will review all contract of the startup. In many instances, the attorney will be asked to draft specific agreements. Some common forms of contracts reviewed or drafted by in-house attorneys include: lease agreements, sales agreements, service agreements, purchase agreements, financing agreements, licensing agreements, partnerships or joint venture agreements.

Claims support – Startups often extend credit to customers or clients for products purchased or services rendered. When customers or clients fail to pay their debts in accordance with the agreed upon terms, the startup may have to initiate claims actions. This can be as simple as a collection letter, selling the debt to a collections agency, or initiating a legal action. In any event, the in-house counsel will take part in this process.

Litigation support – In the event the company is subject to legal actions, the in-house will be the primary actor. In small claims cases, the counsel may represent the startup. If more substantial litigation, the in-house counsel will hire and serve as the point of contact for outside counsel.

How in-house counsel should deal with legal questions

Startup counsel will need to have an organized approach to addressing the litany of diverse legal and non-legal questions they receive. The primary approaches to novel legal issues generally begins with Internet and other legal research. If the startup attorney is unable to acquire adequate information about the subject, she must reach out to her legal network for assistance. If the subject-matter is beyond the ability of the in-house counsel to deal with the legal issues, she will work with outside counsel to address the startup’s legal needs.

When should you considering hiring an in-house counsel?

Startups work on tight budgets. Entrepreneurs prefer to spend available funds on company growth (such as marketing and promotion) or the compensation of those charged with bringing about growth. If, however, the company is spend more than $100,00 per year in legal fees, it may be time to consider an in-house counsel.

Startups are traditionally rapid-growth companies. The company will most certainly need legal counsel if it finds itself involved in a transactional deal, such as debt or equity financing, a merger or acquisition, or a public offering. These types of transactions require knowledge of contracting, securities laws, tax law, and organizational structure.

If the startup is involved in a highly-regulated industry, it may be necessary to bring on an in-house counsel who can oversee compliance. Compliance often entails establishing internal and external controls and making the necessary disclosures and filings to the public of regulatory agencies. Such industries include, healthcare, power supply (electricity, gas, nuclear energy) credit reporting, and education.

If a copy finds itself routinely involved in litigation or involved in a major lawsuit, it is advisable to secure in-house counsel. The in-house counsel will work directly with outside counsel on strategizing and litigating the matter. This will free up the startup team to continue focusing on business operations.

What startups look for on the in-house counsel’s resume

Given the requirements of in-house counsel to a startup, the startup entrepreneurs will generally look for the following qualifications when identifying an in-house counsel to join the team.

Prior experience working with startups.
Prior industry experience
Business and legal acumen. A science, technology, engineering, or math background is also a big plus.
Good personal fit with the startup team
Strong interpersonal and communication skills.
Willingness to accept equity compensation as part of salary.

Let LawTrades be your modern in-house legal counsel.


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