Don't waste your money on lawyers • Hacker News Board

Re: Don't waste your money on lawyers

#21

Post by alain94040 » Thu, Jun 02, 2011, 6:03 PM UTC

tptacek wrote: post #19

alain94040 wrote: post #15

Earlier quoted context omitted.

I'm always amazed by the number of new entrepreneurs who have no understanding of the legal risks when they start their company, especially with co-founders. You need an enforceable agreement in place, and yes, it should not cost $9,000. Those who know me know that I started offering an equivalent online agreement (the fancy term is "virtual incorporation"), which you can check out at http://foundrs.com I continue to…

It is just about the sketchiest thing ever to respond to a discussion of how much legal help you need to set up a legally sound corporation with a plea to instead get a "certificate of virtual incorporation".

Are you sure? I spent two years of my life to build this virtual certificate of incorporation so that it actually means something. So just maybe you are dismissing it too quickly. Of course, it has a very specific range of applications, namely developers for apps, websites and so on, not for dentists and restaurants.

Re: Don't waste your money on lawyers

#22

Post by tptacek » Thu, Jun 02, 2011, 6:07 PM UTC

alain94040 wrote: post #21

tptacek wrote: post #19

Earlier quoted context omitted.

It is just about the sketchiest thing ever to respond to a discussion of how much legal help you need to set up a legally sound corporation with a plea to instead get a "certificate of virtual incorporation".

Are you sure? I spent two years of my life to build this virtual certificate of incorporation so that it actually means something. So just maybe you are dismissing it too quickly. Of course, it has a very specific range of applications, namely developers for apps, websites and so on, not for dentists and restaurants.

"You don't need a lawyer! I did all that work for you!"

Sounds awesome, dude.

For what it's worth: Alain has been on HN for years promoting "Fair Software", a term of art he invented, as an alternative to incorporation. My recollection is a bit vague, but from what I can tell, the deal is that instead of incorporating, you sign up for his service and model your whole business as a "revenue share for code contribution" system, where you get paid 1099 from his company, after he collects fees.

I choose not to engage with the argument about how much more sound your equity structure is going to be with his prefab code sharing system than with an LLC or S-Corp, because structuring equity is only one of many (important) reasons to incorporate, including:

* Not losing your house over failure to perform good-faith contract obligations

* Ability to actually hire employees consistent with the laws of the state you're operating in

* Ability to invoice and be invoiced by large companies who will hang up the phone on you when you try to explain what "Fair Software" is

* Ability to acquire professional liability insurance

And, whatever you may think about the structure he proposes, it obviously doesn't respond to the question of how much legal help you need to start a company.

Re: Don't waste your money on lawyers

#23

Post by rkon » Thu, Jun 02, 2011, 6:18 PM UTC

'Use your lawyer efficiently to avoid wasting money' would be a better fitting title.

The comments that have been posted so far lead me to believe no one actually read the full post. He's not trying to tell people lawyers are all a waste of money.

Re: Don't waste your money on lawyers

#24

Post by khafra » Thu, Jun 02, 2011, 6:21 PM UTC

3am wrote: post #20

_delirium wrote: post #12

Earlier quoted context omitted.

Aren't you assuming that the average lawyer will, in fact, give better advice than can be gleaned through self-research? It's not inconceivable that for a number of routine things, the average advice is not likely to be any better (and possibly worse) than you'd get by reading a standard introductory text on the subject, and using one of the standard boilerplate contracts, after having read and understood standard ad…

He said a good lawyer, not an average one. If one cannot tell the difference when choosing between a good and an average (or worse) attorney, then there is very little chance that they will do an adequate job with self-research, either.

What's the difference in cost between learning to discriminate between good lawyers and bad lawyers, and learning to avoid egregious legal errors on your own?

Re: Don't waste your money on lawyers

#25

Post by tptacek » Thu, Jun 02, 2011, 6:23 PM UTC

khafra wrote: post #24

3am wrote: post #20

Earlier quoted context omitted.

He said a good lawyer, not an average one. If one cannot tell the difference when choosing between a good and an average (or worse) attorney, then there is very little chance that they will do an adequate job with self-research, either.

What's the difference in cost between learning to discriminate between good lawyers and bad lawyers, and learning to avoid egregious legal errors on your own?

Having watched the back on forth on many contract reviews, "just DIY the contract review" is perilously bad advice. Thankfully, nobody gave it. You can DIY your company formation; the biggest risk you run is that you'll botch equity structure, but a lot of people don't care about that issue right away.

Re: Don't waste your money on lawyers

#26

Post by esoteriq » Thu, Jun 02, 2011, 6:30 PM UTC

duopixel wrote: post #4

crikli wrote: post #2

I'm cringing in anticipation of the downvoting, but I can't help myself here: this is TERRIBLE advice. Absolutely egregiously awful. The consultation of a good (that qualifier is important) attorney is worth every single penny. He/she will save you from making terrible mistakes like adopting the wrong corporate form, creating contracts that don't protect you and expose you to liability, signing off on contracts that…

Perhaps I'm missing something (I've never lived in lawsuit happy US), but I've relied on basic human decency all my life and it has turned out fine for me. I think there is a time for lawyers, but it's not when you are building your first prototype. You just can't afford to throw money at problems that don't exist yet.

Most people are decent human beings. But you have to watch out for the minority who are not - they can destroy your business.

I would say that one scenario where you should consult a lawyer at the begfinning of a startup is if the startup engages in a sticky legal area. You know, sharing files, privacy issues, etc. (I'm just thinking off the top of my head here, there's a lot more gray legal areas out there.) How terrible would it be if you found out that your business model is basically illegal conduct?

Be aware of the changing regulatory landscape of the internet - especially in the U.S.

(I don't want to be all doom and gloom, but it's more about figuring out if the startup is worth the risk.)

Re: Don't waste your money on lawyers

#27

Post by bluesmoon » Thu, Jun 02, 2011, 6:35 PM UTC

The best legal investment I ever made was $400 on Law 101 at Stanford. It doesn't turn you into a lawyer, but it teaches you to look at things from a legal perspective, and understand the risks involved with everything you do (seriously, even stepping out of your front door) and think about what you could do to reduce them.

To paraphrase our professor on criminal law, if you stop to think about it, it's actually impossible to get through the day without breaking the law.

Re: Don't waste your money on lawyers

#28

Post by mikeryan » Thu, Jun 02, 2011, 6:57 PM UTC

Don't waste your money on attorneys. Use it wisely. A good attorney is critical for anyone dealing with client contracts and it would be foolhardy for anyone to deal with major corporate clients with nothing but boilerplate contract. Especially if you're getting contracts to sign. (Along those lines get a good Errors And Omissions insurance policy)

Doing a startup? Talk to attorneys who specialize in this kind of thing. When I was just thinking about doing a startup I met with some folks at Orrick (big, big firm) who offered to do the first 10k in services for a small equity stake. An offer like this could have saved the authors ass. They also know everyone who means anything and are a great way to meet the right folks. If they introduce you to your first angel wouldn't it be worth it?

Re: Don't waste your money on lawyers

#29

Post by _delirium » Thu, Jun 02, 2011, 7:07 PM UTC

tptacek wrote: post #25

khafra wrote: post #24

Earlier quoted context omitted.

What's the difference in cost between learning to discriminate between good lawyers and bad lawyers, and learning to avoid egregious legal errors on your own?

Having watched the back on forth on many contract reviews, "just DIY the contract review" is perilously bad advice. Thankfully, nobody gave it. You can DIY your company formation; the biggest risk you run is that you'll botch equity structure, but a lot of people don't care about that issue right away.

IP and liability type stuff is another one I'd probably DIY, at least early on. I have a small sample size (and have never hired a lawyer for that purpose myself), but everyone I know who's hired an lawyer for early-stage consulting on IP or liability risks more or less paid money to hear back, "everything you're doing is probably illegal, oh and you should plaster disclaimers everywhere".

Part might be a product/purchaser mismatch. I think what most people want on such issues is not purely legal advice, but integrated legal/business/technical advice, where someone who might primarily be a lawyer, but is also knowledgeable in the other areas, gives you balanced advice on how to mitigate your legal risks, within the technical and business constraints you also face. But people with such knowledge are fairly rare (and expensive), so it's more common to get very conservative legal advice that just points out that your product or service is a legal minefield (as most are).

Re: Don't waste your money on lawyers

#30

Post by _delirium » Thu, Jun 02, 2011, 7:27 PM UTC

bittermang wrote: post #10

It is like saying that it is a waste of money to hire an electrician to rewire your house. There is enough free information on the internet. Is there? Sure. But your lack of experience and knowledge on the topic could still lead you to electrocuting yourself. Similarly, so could hiring a bad electrician. But the safer bet is with the man whose trade is in working with electric and wiring. And when financial liability…

What about, say, car maintenance/repair? Plenty of hackerly types work on their own cars, despite the fact that a mistake could potentially be fatal, and there are professionals who specialize in the field.