As an entrepreneur, you have taken a concept from your own mind and put in a lot of sweat equity to transform that thought into a reality. Even though you’ve invested significant chunks of your own time to launching a new business, you cannot achieve success alone. All good startups will need the help of outside experts from time to time. Among the outsiders that you’ll eventually need assistance from is an attorney. It is not a question of if you will need to contact a lawyer, but rather, when is the right time to do so.
When to Contact a Lawyer
There are a lot of factors to consider as you begin forming a company and giving life to your idea. Among the biggest hurdles early on for startups are the development of technology, equity distribution, and the standing of cofounders (if any). As noted by Forbes.com, equity distribution among cofounders often creates a sticky situation for startups. Contacting an attorney early in the process of forming your startup is critical.
When you and your fellow cofounders have never worked together before, the potential for conflict (with disastrous outcomes) is high. You are bound to have different views, or perhaps another founder isn’t interested in remaining actively involved with the startup as it grows. Getting in touch with a lawyer early on in the process can help establish distribution of equity among cofounders and set guidelines for control over the company in the event that cofounders split, amicably or otherwise.
If you don’t contact an attorney to walk you through this process early during formation, the situation can get messy quickly. In this case, you’d have to go back to that individual for the approval of anything the company does and resolve disputes over promises made long ago.
What Else Can a Lawyer Do?
Contact a lawyer as you incorporate your startup isn’t all about conflict avoidance and resolution. There are a number of other reasons to contact a lawyer as you begin the formation of your new company. According to Startup Lawyer, entrepreneurs can seek out the assistance of an attorney for issues ranging from incorporation and exit transactions to seed financing and venture capital opportunities.
If you aren’t particularly business savvy, the most important service a lawyer can provide is their knowledge of incorporation. A good lawyer will be able to explain to you the different options available for incorporation, such as LLC, C-corporation, and S-corporation, and help you determine which one benefits your startup the most.
How Much Does an Attorney Cost?
For many people, lawyers are associated with high fees for services. In fact, many entrepreneurs avoid the assistance of an attorney because they assume it will cost too much while providing too little in return for the investment.
When it comes to your startup, you can expect to spend a few hundred dollars, not a few thousand. In most cases, lawyers only ask for filing fees and courier fees upfront during the incorporation process. The vast majority of startups are able to defer the full cost of a lawyer until seed financing has been secured to cover those costs.
Before you take too many steps down the road to incorporating your new startup, give this piece a serious read and consider hiring an attorney to help your startup navigate the path. For a few hundred dollars you can save yourself future headaches and the potential for thousands of dollars in litigation fees down the road.