Things to look for when choosing a lawyer for a startup~

Asked about 6 years ago - Minneapolis, MN

Hello,

We are a startup looking for a lawyer that we can have long term relationship with. We have talked to few lawyers and they seem great. We decided to meet them face-to-face. We were wondering what things we should be aware of in order to choose great lawyer. What questions should we ask? We know that the amount of time they can dedicate to us if there is an issue, is an important question but what other important question should we ask? What should we look for?

Thank you for your time and consideration.

Attorney answers (3)

  1. Joshua M King

    1

    Lawyer agrees

    1

    Answered . First of all, check out our 3-step guide to choosing a lawyer: http://www.avvo.com/avvo_guide/avvo_guide

    More specifically to your situation as a start-up, consider whether the lawyer has broad enough experience and perspective to cover the range of legal issues you're likely to encounter in the first few years. Unless you're operating in a very specialized area (e.g., biotech), you'll want someone who has generalist experience and can guide you - at least at a high level - on matters ranging from business formation to employment law compliance to marketing guidelines.

    You should also make sure your lawyer is a match for you when it comes to risk aversion and cost control. As a new company, you can't afford to mitigate every risk. However, you also can't afford to bet the company on something stupid. A savvy lawyer will help you to tell the difference and appropriately balance risks and opportunities. good luck!

  2. Oscar Michelen

    Contributor Level 16

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    Lawyer agrees

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    Answered . In addition to the good points raised by the Avvo guide and Mr. King's answers, you want to know of their experience inthe specific business area your startup will be operating in. Many business fields have very specific regulations and guidelines, but just as important many "unwritten rules" of custom and practice in the industry that may come into play. A good lawyer knows the relevant laws and ordinances that you will need to comply with, but a great lawyer also knows the nuances of your business and what you can expect from vendors, competitors, regulators, etc. Often what's written on the books is merely the beginning. How it is applied in the marketplace is most important.

  3. George Grellas

    Contributor Level 6

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    Lawyer agrees

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    Answered . The answers given already by Mr. King and Mr. Michelen are good ones covering the broader issues you should consider.

    I would just add this: make sure your lawyer understands the distinctive aspects of a startup on formation. If you have a typical Silicon Valley tech startup, this is how I describe these distinctive aspects in a FAQ section on my website (addressed to a California audience):

    "A 'startup' business, as that term is used in Silicon Valley parlance, does indeed differ from a typical small business venture. Though both are founded and run by risk-taking entrepreneurs, and though both face common sets of issues and problems, the startup business has some distinctive characteristics: it is often formed by a group of founders who consciously pursue a business model designed to have an exit within a few years; it is characterized by stock incentives that are generally forfeitable (even to a large degree by its founders) until earned in the form of sweat equity; often very little cash or tangible property is contributed in the normal case to start the business; often potentially valuable intellectual property (IP) is assigned to the business at inception as part of the company formation; tricky tax issues come into play relating to services being contributed to the startup; equity incentives are offered to what is often a loose group of consultants or early-stage employees, who typically defer or skip any salary or cash compensation; as the team is assembled, the IP developed, and the opportunities for the business model exploited, the founder group will seek outside funding, initially perhaps from 'friends and family' but most often from angel investors and possibly VCs. The startup business venture will show promise, get funded, and take its shot at success within a fairly short period - typically not exceeding a year or two for the first critical assessment - or the founders will fold it up and do other things.

    Thus, a startup business will often need a very different corporate setup at company formation than will a conventional small business - one that provides for a forfeiture risk, in whole or in part, of stock held by founders, for the capture of IP by the company, for setup of equity incentive plans, and the like. Because of the robustness of the corporate vehicle for startup business funding, a business startup venture will more often than not adopt a corporate format, as opposed to the LLC format that is so widely used for more traditional small business ventures. But there are no hard-and-fast rules and a startup business might decide that the LLC format is best for its needs. Though many variations are possible, the overall patterns are unmistakable: viewed generally, while the legal needs of a startup business and those of a conventional small business will in many ways overlap, they do indeed often differ, at times radically so, at key points as well."

    Make sure your startup business lawyer is well-versed in the above issues. Also, a startup business lawyer should understand equity incentives well, including incentive stock options (ISOs) and non-qualified options (NQOs) and should further be able to handle issues relating to seed, bridge, and preferred stock funding and the a reasonable range of IP issues as well.

    Of course, if your startup is a more conventional small business, then the above issues are not necessarily important, as the representation you will need would be more than adequate if handled by a lawyer who is a good general business lawyer. The best rule with lawyers as with everything else is, keep it simple - use a specialist if you need one and otherwise don't complicate things if you don't have to.

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