By Tian DuBelko
For tech founders, hiring a lawyer for your startup can be an intimidating and confusing process. How do you even know if your business needs a lawyer? And how do you work with one? With the right legal support, you can confidently focus on your business, knowing that your legal ducks are all in a row. Here are 7 factors to consider when hiring a lawyer:
Timing
While big tech giants like Apple and Google have legal teams on retainer, most startups can’t afford it. However, situations may arise that requires you to consult legal advice. Such situations may include:
- Incorporation (creating a business entity)
- Negotiating contracts and terms of services
- Hiring employees
- Obtaining patents (tech)
- Raising capital
… plus other unforeseen circumstances. During your startup journey, you may need legal aid in dealing with other founders, third parties, your customers, or even the government.
Priorities
If you’re a small startup on a shoestring budget, you should focus on these legal priorities for your business:
- Establish a business entity (LLC or Corporation)
- Establish the business’ intellectual property
- Outline the company’s ownership and equity rights (if there are multiple founders)
Doing the above will make sure that you’re personally protected from business liabilities, as well as protect any IP that your company owns, especially if you’ve hired independent contractors to develop it. Also, something a legal team can help you with is understanding the tax ramifications of your actions, especially concerning things like granting employees equity.
Cost
This varies depending on the firm, but most lawyers that startups deal with cost in the $350 to $800 an hour range. Big firms tend to bill in increments of six minutes or fifteen minutes. That means your hourly rate can get expensive quickly. Junior lawyers will charge less (around $150 an hour) along with lawyers in smaller firms in smaller cities. Senior partners, however, have been known to charge over $1,000 per hour.
Knowing what type of lawyer your startup needs is crucial to setting a reasonable budget. Don’t be afraid to discuss your budget up front with lawyers. Even if they can’t take you on, they can generally offer you some insight into your situation.
Fit
Just like hiring employees, the fit is something to consider when you’re looking for a lawyer. Referrals are a good place to start. And if you are a member of an office space that connects you to legal professionals, you’re in luck. Either way, you’ll want to find a lawyer who is not only professional, competent, and experienced in dealing with the kinds of legal issues you need help with, but also someone who you can trust and work with.
You’ll want the right type of lawyer for your needs. For example, you don’t need a senior partner gathering paperwork for an incorporation. Nor do you want a first-year lawyer negotiating with experienced venture capital firms on your behalf.
Red Flags
When hiring and working with a lawyer, there are some red flags you should be aware of. First, a lawyer who doesn’t speak the language of your business is troublesome. Just as how you wouldn’t hire a fast food lawyer to incorporate a software company, don’t hire someone who doesn’t understand the environment that you operate in.
Also, lawyers who seem to be always springing you with extra costs are to be avoided. It’s nearly impossible to maintain a cost-effective legal solution if you’re being billed on surprise here and there.
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