Most businesses, large and small, consider the task of finding the right lawyer a difficult and risky one. Those risks and difficulties are only exacerbated when you are a startup company. Startup companies face unique challenges, including the high risks inherent in the enterprise, cash flow limitations, fundraising pressures, and – in most cases – high stakes intellectual property interests.
The effect of these pressures is that a startup company feels it has to navigate an impossible trade-off between cost and expertise. This dilemma sometimes leaves startup companies without lawyers for too long – a significant (and costly) risk.
This article tells you everything you need to know about finding the best lawyer for your startup company: why you need a lawyer, how to approach the search for one, and how to best manage legal costs.
Why (and When) Does a Startup Company Need A Lawyer?
Immediately. Unfortunately, this is when a startup needs a lawyer: as soon as there is an idea. The good news is that there are many options to help you to find and attorney, and be strategic about the legal costs you incur. More on that below. Firstly: why do you need a lawyer that soon?
Startups are as varied and diverse and the people who found them. They all have one thing in common, however: a unique idea. Whether this is a new invention, service, good, design, or a new combination of existing ones, startup companies get founded because they bring something novel to the market.
Before a startup needs to think about funding, hiring, or anything else, it has to secure the value of its innovation. This requires deft legal expertise. It is not merely a matter of filing for a trademark or patent. It also involves formulating an overall IP protection strategy, deciding on the best forms of protection, and knowing how to approach and disincentivize IP violations.
Getting this wrong threatens the very existence of a startup company. For this reason: as soon as you have an idea, you need legal expertise.
Apart from IP interests, a startup company will need legal expertise to decide on, and set up, its corporate structure, to compose and file all post-incorporation documents, and to ensure compliant hiring and contracting practices.
Ideally, all of these steps have to be completed with due regard for and knowledge of the startup company’s strategic interests. Each of these steps have implications for the startup’s tax liability, equity distribution, contractual liability, day-to-day operations, and attractiveness to investors. The best lawyer for your startup company is one that has the knowledge and experience to serve all of your individual legal needs whilst keeping an eye on your overall strategic goals.
And finally, when your startup has been set up, funding has been secured, and hires have been made… at this stage, the best lawyer is one you never seem to need. If your employment contracts, service agreements, data protection practices, tax compliance, and IP protection strategy is done correctly, you will be spending your time on what you do best: growing your business. If not, however, the cost of not having the best lawyer for your startup becomes apparent: tax liability, compliance issues, funder dissatisfaction, litigation, contractual liability, and lost economic opportunities.
How to Approach the Search for Your Startup Company’s Lawyer?
Most startup companies have some common blind spots when it comes to looking for a lawyer.
The first is limited awareness of your legal needs. In the early stages of a startup, founders want to focus on what they think are essential: perfecting the product, securing financing, and hiring talent. It is not always clear to them that the success of these three processes are dependent on expert legal advice. Accordingly, startup companies sometimes hire small business lawyers on an ad hoc basis to resolve crises rather than finding an expert as a preventative measure.
The second big blindspot is cost awareness. Most startup companies start out with limited funds. Legal costs can be very high. Even more discouragingly, legal costs can be unpredictable.
However, if you approach the search for a lawyer correctly, you can address both of these blind spots effectively.
When trying to find an attorney for your startup company, take the following considerations into account:
Do they have experience in your industry? This can be a decisive factor, especially if you are relying on them for your IP protection strategy. Hire someone that not only knows the law, but also your market.
Do they have startup experience? Ask them for references from previous startups that they have assisted. Legal experience with the startup’s unique position in the market will allow them to assist you not only at an execution level, but also strategically.
Are they networked and connected with capital? Finding lawyers that are connected to angel investors and venture capitalists can offer a significant advantage. Regardless of connections, be sure to ask them about previous startups that they’ve assisted through the fundraising process.
What is their experience with, and exposure to, the legal fields that you will need assistance with? Your startup company will need legal expertise in the fields of intellectual property law, contracts, employment law, tax, corporate law, and securities law (amongst others, depending on your situation). The best lawyer will be able to help you with each of these, or be able to refer you to colleagues in his/her firm that can.
Do they share your strategic vision? Is this a lawyer that can grow with you? Do they share your approach to risk, your company’s growth mindset, and values?
Hiring a single legal firm for all your needs might allow you to qualify for discount. Be sure to find out whether that is the case, and to ask about the availability of prompt payment discounts. Some other steps that you can take to ensure predictable legal costs that you can budget for, include:
Find out at what increments your lawyer bills. Some lawyers bill in increments as small as 5 minutes, others in 30 minute blocks. Knowing this will help you utilize your lawyer’s time wisely.
Request written estimates of costs. This can help you prioritize and budget.
Be prepared. The more prepared you are when you contact your lawyer for assistance, the more cost-efficient that assistance will be. Depending on your situation, you might even want to consider hiring someone on your side for basic administrative tasks that can help with this.
Find an Attorney at LawTrades
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