Most startups are on a limited budget. There are so many things to pay for and you don’t even have cash flow yet! As a startup lawyer, I am familiar with this difficult situation for many startups. Especially those who are bootstrapping their initial costs. There are so many things you need.
- You know you need to limit your liability.
- You know you need an entity.
- You know you should protect your business relationships with a contract.
But, when legal needs are piling up, no matter what your cash flow looks like, the fees can add up too. So, how do you know where to begin? How do you know what should come first? How do you know what legal needs you could figure out yourself versus the ones you need help from a lawyer?
Ultimately, mistakes in legal can have a number of different consequences for your business:
- You could not be protected like you think you are.
- You might not be able to collect money for the work you did.
- You may not be able to collect attorneys’ fees or interest if you must go to court.
- You may make yourself a target for lawsuits when your business finds success because you made a mistake early on.
With all of this gloom and doom, how can you know what will be the most effective use of your legal dollars to protect your business?
Let me help you get the most out of your legal spending.
If it is only you or you have one partner and you are bootstrapping your startup, the most effective use of your legal dollars is not in the formation of your legal entity. Honestly, that is difficult to mess up. At least at first. You will need to come back to it, but when you are in the startup phase, you just need to make sure the basics are covered. Whether you use a lawyer initially or not, you should review all of your startup documents annually anyway.
If you want, you can check out the startup checklist to get started.
If you are in a startup and you want to get the most out of your startup lawyer, you should consider what legal protection will be the most effective in your business. More than that, you should consider what liability you may incur or what protections you may need in the regular day-to-day activities of your business. Check out these examples to help you think about what you may need:
Software Product Companies
If your startup centers around the development of software or other intellectual property, one of the most important legal protections you need relate to your intellectual property. If you have employees, partners, founders, or independent contractors who are creating intellectual property for your startup, you need to make sure your intellectual property agreements are solid. In the startup phase, this is the most important legal protection you have when your business centers around the creation of intellectual property.
Custom Software Developers
Whether you are freelancing or you have employees working for you, if you are custom developing software for clients, you need to make sure your intellectual property provisions in your custom software development agreement are clear and effective in helping you collect from your clients. You want to make sure you do not create a work-for-hire. Go here to read more about custom software development agreements. As a software developer, this is the most important legal protection you have followed closely by your independent contractor agreement.
If your startup is a service firm, whether it is creating intellectual property or other professional services, you want to make sure your client agreement is not only clear and allows you to bill for all of the work you perform, but also (almost more importantly) that you can collect the fees you charge. This includes making sure you include attorneys’ fees and interest charges if your client doesn’t pay you when they should.
Legal Should Protect Your Startup for Growth
As a startup, it is important to spend your money wisely. You need to control your cashflow early on, so your business can adequately grow. Your startup lawyer needs to be there to help protect your business for growth, not hinder your business from it.
That is one of the reasons I created the Corporate Counsel Program. A membership program that gives you access to your startup lawyer without fear of extra fees for phone calls and emails. On top of that, you can get discounts for those essential services you may need as you get your startup off the ground.