A first-time entrepreneur’s list of things to learn can stretch out the door and around the block.
Wise entrepreneurs quickly learn that they can’t be an expert in everything themselves. Instead, they learn enough to be able to recognize (read: admit) what they don’t know, to ask the right questions, and to hire experts when appropriate and heed their advice.
This is really the case when it comes to legal matters. Unfortunately, like time, capital is limited in early startups, and appropriate legal planning is all too often the first to fall under the ax. This can be a grave mistake, particularly if you plan to raise angel or institutional capital. So how do you find the right attorney for your young company?
- Research the Internet, talk to other entrepreneurs and entrepreneurial support organizations to become familiar with the types of legal assistance that entrepreneurs need. In the beginning this will include advice on setting up your company, choosing an appropriate corporate structure (yes, it actually does depend on your anticipated capital and long-term operating strategy), and determining what filing and permits are required in your location. It might also include assistance with real estate transactions, licensing agreements and contracts with customers or business partners.
- Seek referrals from people you trust. Ask friends, family, and other entrepreneurs and other service providers, such as CPAs. Call the local Bar Association. Ask members of professional societies or the Chamber of Commerce. Get out and meet people at events that cater to entrepreneurs.
- Look for individuals who are experienced in dealing the entrepreneurs and startup companies. You want legal professionals who are competent and established in the community — and who know the potential pitfalls in the startup world. Legal faux pas are easy for even very experienced corporate lawyers to commit if they do not often deal with high growth startups; it’s just different. Find professionals who understand the territory, who have battle scars, and who still enjoy the excitement, pace and challenge of entrepreneurial firms.
- When hiring your corporate counsel, be direct about fees. Some attorneys may suggest ways to limit your expenses. We’ve seen a few who offer “entrepreneurial rates.” Ask for typical ranges of fees for services. Request a flat price instead of an hourly rate. Engaging counsel with adequate startups experience can save time and money simply because they are more familiar with the dealings.
- Secure the appropriate protections for your IP. Intellectual property rights may be your most valuable asset. If applying and receiving patents are part of your business plan, engage a patent attorney. I’ll say it again; engage specifically a patent attorney, not a jack-of-all-trades startup. The USPTO provides specialized assistance for entrepreneurs through its Office of Innovation Development. If you aren’t involved with patents, you still need to understand the appropriate use of non-disclosures/confidentiality agreements — do not ask accredited or institutional investors to sign either but rather only share non-critical information until you engage in diligence — and how to alert business partners and associates that they may be exposed to trade secrets.
- It may make sense to seek specialized advice to understand future risks. Hopefully, you company will never be involved in a lawsuit. However, in our litigious society, it pays to get advice up front to avoid problems later on. Invest in a few hours of an experienced litigator’s time to discuss non-compete agreements; arbitration clauses in customer contracts; issues with disgruntled employees; EEOC, OSHA, and other compliance requirements, or specific trends in your industry where legal matters are concerned.
We don’t know anyone who enjoys paying legal fees, but we do know plenty of entrepreneurs who will say the advice they have received from their corporate counsel has been invaluable.