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What Start-ups Should Know About Hiring a Lawyer

Jan. 23, 2020

Knowing When and How to Hire an Attorney for a Start-up

Starting a new company reveals a bewildering array of possibilities and decisions and near the top rests a question: “should a lawyer be involved and, if so, when?” Whether the question seems rhetorical or ludicrous, most start-up companies consider the possibility of hiring an attorney at one point or another. Here we cover the basics to know when hiring a lawyer probably makes sense as well as some pointers on finding the best lawyer for your need.

Before we dive into specifics, let us talk about the role lawyers play in a start-up business. Unless the new company is a law firm, a lawyer provides guidance on the laws which exist and their impact on the company. A lawyer’s true wealth of wisdom derives from their knowledge of the way courts and enforcement agencies interpret and respond to laws. Any start-up lawyer can provide examples of laws that exist but don’t get enforced and actions or behaviors enforced but lacking a clear law. Both situations affect a company and only getting the proper counsel reveals the difference between business risks and trivia answers.

Common examples include:

  • Business set-up: creating a corporation, limited liability corporation, or other business entity along with getting initial licenses and accounts established,

  • Tax law: ranges from assisting with setting up tax accounts and defining what taxes will be owed to assisting with decisions about accounting and tax software intended to make reporting and remitting taxes simpler,

  • Contract law: typically focused on creating contractual agreements designed to protect the start-up from the dangers in the business world, and

  • Labor law: employment law covers numerous laws and requirements which warrant legal advice and counsel.

When should a start-up consider hiring a lawyer?

Any business activity which makes management nervous about the potential consequences of doing something wrong probably creates a reasonable case for contacting an attorney. Considering our sample list alone we find subject areas carrying serious negative consequences which range from fines and penalties to jail time in some cases. For example, incorrectly creating a corporate entity could leave shareholders personally at risk for the new company’s decisions which could be financially disastrous. A start-up lawyer handles such creations frequently enough to prevent the most common problems. Securing an attorney taps into a resource to mitigate these risks, potentially even eliminating them entirely.

How should a start-up go about finding the best lawyer for them?

Perhaps the adage, “They don’t care how much you know until they know how much you care,” provides the best guidance for picking an attorney. Take the time to set an appointment and go with the intention of interviewing them. Make a list of your questions and ask them. During the meeting, be yourself and see how the attorney responds. Evaluate whether they care about your business and you. Afterward, sit down and answer the following questions from your perspective:

1) Did you feel comfortable in the conversation?

2) Did the conversation cover all of the business needs? If not, was the reason because of the attorney diverting the conversation?

3) Is the attorney (or their firm) capable of meeting all of the legal needs you identified? If not, are you okay with multiple attorney relationships in order to have the proper legal counsel?

Being comfortable in the conversation might seem insignificant, but consider that companies frequently discuss embarrassing decisions or oversights with their attorneys in order to get legal advice. Finding the best lawyer only benefits the company if accurate information gets presented. Not discussing things or failing to disclose all the details affects the counsel given and ultimately works against getting the support necessary.

Having comfortable levels of conversation helps, but remember the relationship remains about business. Attorneys typically charge by 6 to 15-minute intervals and these bills can still be in the hundreds and thousands of dollars per month. That bill becomes tougher to swallow when a sizable portion of the time was spent discussing a recent vacation. Depending on your answer to this question, the relationship might not be a “no”, but may instead be one where you have to keep conversations on track.

While there is a need to know the attorney’s areas of expertise, this question comes last because it bears the least impact. Finding an attorney you feel comfortable with and who stays on task becomes a huge asset whether they answer every question or only certain ones. If their knowledge area is too limited, then another attorney might need to be added, but this expands the circle of legal advice. Whether this benefits or not remains a decision for the individual business.

Hiring an attorney may seem daunting, but the process works like any other business relationship. Find legal counsel who works well with your organization, build the relationship, and use their services when it makes sense. The proper attorney relationship provides an enormous return on investment as their expertise positions your company to avoid headaches, penalties, and fines.