5 Reasons Startups Need a Lawyer from Day 1

Starting your own business can be a mammoth undertaking, especially when it comes to managing expenses while working (often tirelessly) to build momentum, and eventually, a revenue stream. Many new business owners grapple with the right time to hire an attorney. Although the thought of engaging an attorney from Day 1 may seem cost-prohibitive, it is a smart business decision even for the smallest companies. Of course, you’ll want a lawyer who is fairly-priced and efficient, and who has experience working with startups. To better understand why startups should engage a lawyer at the outset, consider these 5 typical “new business” tasks that a lawyer might handle on your behalf:

• Writing Website Policies. You may be tempted to “copy and paste” Terms of Use or a Privacy Policy found online to save money. But this is not wise because (a) it is likely illegal (copyright violation), (b) you have no idea if the language you’re copying is any good, (c) the terms of the policies may not suit your business model (for example, you may copy b2b terms when you are a b2c), and (d) although 90% of certain documents, like a terms of use, are “boilerplate,” the last 10% can be extremely important, especially in certain highly regulated industries like telecom, healthcare and finance, or if your product is unique.
  
• Drafting a Standard Customer Contract. Again, in lieu of a “do it yourself” approach (copying another company’s template), your business will benefit from a customer contract that is tailored to protect you from unforeseen liability and risks. This step can be handled affordably and efficiently by an experienced lawyer who has time-tested templates that will just need some tweaking after a conversation or two about what makes your company different from the rest.
  
• Reviewing Vendor Contracts. You will undoubtedly enter many different agreements with vendors as you get your business off the ground. A lawyer can review (often quickly) these contracts for any “gotchas” to prevent the vendor from taking advantage of you. For example, provisions like representations and warranties and indemnification can unknowingly cripple a business, or at the very least, stagnate it while you expend energy solving unnecessary problems. In this case, hiring a lawyer is like buying insurance; you do it to protect yourself from unforeseen issues that could potentially destroy your business.
  
• Protecting Intellectual Property. What’s in a name? In some cases, a company’s net worth is tied closely to the value of its trademarks. An attorney can do a trademark search to ensure your planned company name or brand names are available and possibly help you file for trademark protection. As you grow, you might use a lawyer to file for other trademarks or patents.
  
• Providing Strategic Business Advice. An experienced business lawyer can act as a sounding board for both legal and business issues (e.g., alternative deal structures, knowledge of industry standards for pricing or other terms, etc.). They can also answer questions that come up from time to time (e.g., how do I comply with the new privacy laws?). And finally, even if you haven’t even formed your company yet, and it’s just an idea in your head, a lawyer can still help you with:
  
  • Choosing a Corporate Structure
    This step is important to protect you against personal liability. An attorney can help you decide whether to form an LLC, a corporation, or a partnership, and then help you to form it.
    
  • Defining Ownership
    Even if you’ve already formed a corporation or LLC, a lawyer can review your articles of incorporation or LLC Operating Agreement to ensure the terms reflect the agreement among owners. This step is particularly important if there are multiple owners or investors (even small angel investors or friends and family). A lawyer can help you anticipate issues like how to resolve disputes between owners, what to do if an owner dies or becomes incapacitated, what to do if one owner wants to sell their ownership interests in a privately held small company, etc.

A new business will face a host of issues from Day 1, but tackling them alone is neither advisable nor necessary. An attorney with the right experience can provide efficient and affordable support. Moreover, a good attorney will not be focused on maximizing your bill today, but rather, on adding value by providing advice that makes him or her a trusted part of your team for the long run, so that someday, when your startup is as big as Google, you are still using them as your lawyer.  

Brian Heller is a Member of Outside GC’s Washington D.C.-based team, and is an experienced technology and deal attorney, specializing in SaaS software licensing, Virtual Reality (VR) products and services, digital and social media, online advertising, mobile apps, cloud services, terms of use, data use and protection and content licensing. Brian has represented both vendors and customers and uses this experience to present reasonable positions on behalf of his clients. Brian can be reached at [email protected].