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What Start-ups Should Know About Hiring a Lawyer

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Re: What Start-ups Should Know About Hiring a Lawyer

#11
I think they chose the wrong lawyer to speak with. From what I can tell, he's a lawyer more versed in dealing with much larger companies and venture capital transactions as opposed to the typical start-up (if such a thing exists).

Particularly in the field of web (contrasted with physical products/live events for example), the need to consider compliance is reduced. If you are providing a good service to users, it is unlikely you will run into issues in terms of consumer complaints.

I would caveat it by suggesting that intellectual property is (obviously) an important area to consider. However, there are online tools for patent searching which will be able to give you an idea of whether your product could be patentable (no patent search even done by a lawyer or patent attorney would be exhaustive in any event).

As to brand protection, trade mark registration in the territory where you are based will be relatively cheap and will give you a degree of leverage if someone else starts up a similarly named service. Although it must be said that the main reason people will copy a name is to piggyback on goodwill which will not be a relevant consideration for most start-ups.

Many actual start-up lawyers will be willing to give a few hours of their time for free or at least should be, to talk with you about your business and highlight any initial concerns and make recommendations to help your business.

If they do provide recommendations, I suggest that if they haven't done already you request a fixed rate for any one particular piece of work. If they can't provide a fixed rate, I suggest you look elsewhere. There are sufficient good lawyers out there to enable you to find one who will be willing to be more flexible on fees than rigidly sticking to an hourly rate.

In terms of tax, I would suggest the above but in relation to an accountant, the basics of corporate taxation are relatively simple and you should be able to find an accountant willing to give you time for free.

On a side note, although it is easy to bash lawyers' fees, if you are a large corporate operating in an area where legal compliance is crucial, an hourly rate of $1000 per hour is a drop in the ocean if it saves you many multiples of that in avoiding costs. Blame shifting in ensuring you have someone that you can sue if they make a mistake can be priceless. But that doesn't mean it's appropriate for start-ups particularly considering monies could be spent better elsewhere.

Re: What Start-ups Should Know About Hiring a Lawyer

#12
post #3

That's incredible how much a lawyer's hourly rate is. A senior partner >$1000/hour? It's amazing how expensive risk reduction services are that, in my mind, equate to a blame shifting strategy.

Somewhere, some lawyer is probably wondering why it costs $1000/hour to develop what she believes is just a simple website.

Re: What Start-ups Should Know About Hiring a Lawyer

#13
post #4

Better call Saul

IMO, this is true.

1) Saul: "sometimes you need a criminal lawyer". 2) Startups: "sometimes you need an entrepreneur lawyer". I've always heard that the difference between competent and great lawyers is that competent lawyers will tell you what you can do within the law (i.e. how you can handle a financing round, etc.), and great lawyers will help you figure out how to do the best thing for yourself and your business while remaining within the law.

Re: What Start-ups Should Know About Hiring a Lawyer

#14
post #3

That's incredible how much a lawyer's hourly rate is. A senior partner >$1000/hour? It's amazing how expensive risk reduction services are that, in my mind, equate to a blame shifting strategy.

I've been both a lawyer and a programmer, and I've observed something: Lawyers will shock you with their hourly rate. Programmers will shock you with how many hours they log.

Re: What Start-ups Should Know About Hiring a Lawyer

#15

What kind of startup can afford $350-$800/hour lawyers?

When you're a really tiny startup, you don't really have any legal needs that take a lawyer more than a couple of hours to do. When you're bigger, you still don't have a ton of work in terms of hours.

The startup I worked at had a quarter-million in legal fees one year. That was about as much as just one of our hired-gun contractors.

Re: What Start-ups Should Know About Hiring a Lawyer

#18
For a non-Valley, non-VC, non-swing-for-the-fences (Sand Hill Road cookie cutter) startup, think about where your risks really lie (who is going to sue you; when; why; and for how much). If you have partners, then having someone walk you through all the 'what if things go wrong' stuff may be useful. If it's just you, then you can even postpone incorporation. As for tax - that's a nice problem to have, but it's not one that's going to loom large on day one (or even year one). I would be amazed if it made sense for the median startup to register any trademarks. And if you "need" patents, really drill down on what that "need" is (if it's just a tick-the-box exercise for eventual VC's, then one jurisdiction might be enough; if you need a global patent protection strategy to secure your fundamental business value, you're doing it wrong).

When you do hire a lawyer, get an estimate up front, make clear that you want to know in advance if the bill is getting anywhere near the estimate, and require monthly interim billing if there is something ongoing. If you can fit in some scornful laughter at the idea of billing for photocopying and phone calls, that would be good, too. Many lawyers pay lip-service to the idea of fixed fees for defined projects: think about calling their bluff. And ask about other value-added services they might provide, such as introductions to other clients who might be interesting to know. This will be like pulling teeth, because lawyers are pretty terrible at everything in business except (if you are lucky) the legal stuff.

But they probably do know the legal stuff better than you, so don't try to impose irrelevant constraints, like "I want a one-pager for this".

Re: What Start-ups Should Know About Hiring a Lawyer

#19
post #13
post #4

Better call Saul

IMO, this is true. 1) Saul: "sometimes you need a criminal lawyer". 2) Startups: "sometimes you need an entrepreneur lawyer". I've always heard that the difference between competent and great lawyers is that competent lawyers will tell you what you can do within the law (i.e. how you can handle a financing round, etc.), and great lawyers will help you figure out how to do the best thing for yourself and your business…

It's true, but it's also pretty hard to figure out whether you're actually remaining within the law since things are so rarely tested (at least in the startup world).

Re: What Start-ups Should Know About Hiring a Lawyer

#20

Here's what I learnt in law school: Do you have a legal question? See a lawyer. A few hundred dollars now versus an uncapped downside later? You're basically crazy if you don't. Your lawyer and accountant are to your business what a doctor and a dentist are to your body. You see them regularly, they give you specialist advice and they can save you serious trouble if you take their advice. These individuals see more p…

In US certainly, but here's what I learnt living in Europe. You basically do not need lawyer. Ever. You can live happy life and run happy business. Without lawyers, without fear that somebody/anybody can/will sue you of anything. Wthout fear of shady contracts, shady business practicies etc. And even in very rare occasion when somebody decides to sue you and this case goes to court, even then you do not always need a lawyer. In Europe you can go to court without lawyer and win. I did, so can you.
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