At some point in the early stages of your company you will realize that you need a lawyer. Hopefully, this call to action is the result of a growing business and not legal misfortune.
The first common legal need of a startup is company formation. You have cofounders, intellectual property, contractors and maybe some revenue – securing yourself within a legal entity is prudent. Once your company is formed, however, what about these other very legal-related issues? intellectual property and employment? What happens when something really goes wrong (or you think something has gone wrong) in one of these areas? Do you call the same one attorney for everything?
We estimate that 75% of entrepreneurs would think that the same attorney who legally formed their company could handle all of their legal issues. This is like saying that you go to the same general practitioner doctor for open heart and laser eye surgery. It is rare to find a doctor who can serve many different medical needs with a high degree of accuracy and skill. Specialization is the name of the game. The same applies when hiring lawyers for your startup or small business.
Based on a survey of general counsel, business attorneys, and seasoned entrepreneurs, we concluded that every startup has three major legal needs. Don’t waste your time and money going through a general practitioner, go straight to the source.
That being said, sometimes you’re unsure if something is wrong, or you do not fully understand the severity of a legal situation. You need someone who can give you an unbiased reality of your legal situation, and who understands that business is the number one priority. This takes a special type of attorney, and a special type of relationship.
Industry Knowledgeable Corporate Attorney
This is your general practitioner who helped form your company and will probably help with your funding as well. They are typically called “Corporate” attorneys. It is rare, however, to find a corporate attorney who is also a specialist in employment and high tech intellectual property. Be mindful of this when asking these type of questions to this type of attorney. They generally can give high level advice on these issues, but will often need to refer to someone else for a more detailed analysis depending on the problem.
Intellectual Property Attorney
Intellectual property is all around you and you probably don’t even realize it. Logos, customer lists and computer code – it’s all intellectual property — and there are right and wrong ways of protecting each type. For many startups, intellectual property makes up a significant value of the company (the team being the other major piece). You went through all that effort to properly form the company and protect your team – shouldn’t you go through the same diligent process to protect your intellectual property?
Employment Attorney Attorney
Some of the greatest headaches of being a business owner involves employees. As a startup, you are taught to run lean, hire fast, and fire even faster (according to some entrepreneurs). Both of these situations raise two of the most heavily litigated business law in the U.S. – 1) misclassifying employees as contractors; and 2) lawsuits from terminated employees. Employment law is a nasty web of regulation often stacked against a business. You need someone who has been in the trenches with businesses and understands the extensive case law behind their state’s employment rules. This takes years of practice which is why a specialist is demanded. Before you hire an employee, bring on an independent contractor or decide to let either go, you should check with your employment attorney first.
“Let’s Grab Beer” Attorney
Lastly, and probably most importantly, you need an attorney that all legal issues or questions, can be initially run through – like when you get a letter about infringing content on your site, when you need to fire an employee, or when you want to scrape information from a third party website contrary to their terms of services. These are the kind of attorneys where little is put into an email, and most conversation takes place over lunch, a beer, or at least a phone call.
They are typically your jack of all trades and give you the best business options vs advising you down the path of least legal risk. Rarely do these individuals bill their time. Most importantly these attorneys are going to tell you how to phrase any legal issue to your other attorneys and will let you know when you have a big problem on your hands requires big (and more expensive) legal guns.
This type of relationship takes some time to find and can be easily be abused. When you do find them, your legal paranoia will decrease and your wallet will scream for joy. So, start hanging out at law school happy hours and talk to your friends to see if they have such an attorney.
Matt is the co-founder and CEO of UpCounsel (www.upcounsel.com), a legal services marketplace. UpCounsel makes it easy to find and hire a great attorney for anything. Matt started his career as a startup and venture capital attorney.