So, you are thinking about hiring a lawyer to help navigate your startup's legal needs.
A good startup attorney is more than just someone who can draft a document or navigate laws and regulations. A good startup lawyer is an essential partner in your business. Ergo, choosing the right lawyer for your startup is just as important as choosing the right business partner.
Finding Your Startup Lawyer
In this guide, we will walk you through everything you need to know to find the right lawyer for your startup.
Here are the ins and outs of finding a lawyer for your startup:
- When You May Need a Lawyer for Your Startup
- Where to Look for a Startup Lawyer
- Hiring a Lawyer vs. Using an Online Legal Service
- What to Look for in a Startup Lawyer
- What to Ask a Startup Lawyer
- How Much Does a Startup Lawyer Cost
- Red Flags to Watch for From a Startup Lawyer
When You May Need a Lawyer for Your Startup
There are a number of situations in which you may need a lawyer for your startup.
If you are uncertain about the legal ramifications in an area where you are not well versed, hiring a lawyer can save you money and help you avoid mistakes that may result in situations with unintended and costly consequences.
Recommended: Read our guide on when you need a lawyer for your startup to learn more about the top situations when you should consider hiring a startup lawyer.
Where to Look for a Startup Lawyer
There are a number of places you can look for a startup attorney. You may want to begin by asking for referrals. Start with your own entrepreneurial network, your personal attorney, or another attorney you trust.
You can also use online referral services. A good place to start is with the American Bar Association. There are also a number of commercial referral services to help you find the right attorney for you.
Many entrepreneurs also turn to online legal services such as RocketLawyer, which offer a range of services, including incorporation, standardized and customized legal forms, and help with obtaining IP protection.
One of the best places to look for a startup lawyer is through referrals from people you know. Ask your advisors, mentors, investors, and fellow entrepreneurs who they use for their legal needs and who they would recommend. You can also ask your personal or family lawyer, or a lawyer you trust, for his or her recommendations. Chances are that they know a good startup lawyer that they would be happy to recommend to you as well.
Online Referral Services
Another great place to find a startup attorney are online referral services. One option is the American Bar Association (ABA). The ABA provides a number of ways to find legal help, including free legal answers and a referral service to help you find a lawyer.
Additionally, many state bar associations have their own referral services to help find a lawyer near you. Check with your state bar association to find out more about referral services in your state.
Other options include one of a number of commercial referral services such as Avvo, UpCounsel, and LegalMatch. These services will help match you with a specialized lawyer that can support your legal needs. Many of these services allow you to search for a lawyer by specialty and location, or they allow you to describe the legal support you need and review proposals from vetted lawyers who match your legal needs.
Online Legal Services
Online legal services such as Rocket Lawyer offer a host of legal services. For a fee, you can find standardized and customizable forms for business formation. These forms often include registering a business name, business compliance, non-disclosure agreements, leases and contracts, registering trademarks and copyrights, and applying for a patent.
Many online legal services also allow you to contact an attorney online, by email, or by phone for routine legal guidance and advice. Many of these legal services can be contracted either through a monthly subscription or as one-off services.
Hiring a Lawyer vs. Using Online Legal Services
When you know what you need, or your legal needs are not overly complicated, online legal services may be a viable alternative. When used correctly, these services can greatly reduce a startup's legal expenses.
However, online legal services do not replace your need for a personal relationship with a lawyer. As your legal needs get more complex, you will want to have a startup lawyer that is familiar with you and your startup who you can turn to for advice.
What to Look for in a Startup Lawyer
There are several important things you should look for in a startup attorney.
The first thing you should look for in a startup lawyer is someone who has experience handling the types of legal issues that you need assistance with. Foremost, you should look for a lawyer with experience helping startups. Your lawyer should be able to guide you through the startup process — from incorporation to raising capital and ultimately exiting through acquisition or IPO.
A second important issue is experience with clients in your industry. Different industries are unique and subject to particular laws, rules, and regulations. Your lawyer needs to understand the legal landscape of your industry in order to ensure that you are in compliance with the rules and regulations that apply to you.
Finally, you need to find a lawyer who “fits” with you, your co-founders, and your startup. Look for a lawyer who you trust, get along with, and who is approachable. Listen to your instincts. You should be comfortable having a conversation with your lawyer and confident in their abilities to provide sound advice and guidance.
What Types of Legal Support Does Your Startup Need?
In order to find the right attorney for your startup, you will need to determine exactly what type of legal support your startup needs. Will you need help incorporating your business? Protecting intellectual property? Reviewing contracts? Maintaining corporate compliance?
In choosing a lawyer, you should consider your one-time vs. long-term legal needs. While legal support in business organization, contractual, and real estate matters may be services your startup only needs help with once, intellectual property, compliance, and tax matters may be a long-term legal need.
Here are some of the most common areas where you will need legal support for your startup:
You may need to consult with an attorney that specializes in incorporating your startup. While it is possible to incorporate without a lawyer (especially if you choose to incorporate as an LLC), it is recommended to at least consult with an attorney when forming a corporation. Startup lawyers can help you understand the complexity surrounding incorporating, choose a business structure, and make sure you have everything in order to incorporate your startup.
If you are developing any type of intellectual property (IP), you may require the services of an attorney specializing in IP. An attorney can assist you in registering trademarks for your brand names and logo(s), copyrights for your creative works, and patent applications for your designs and inventions.
You may wish to consult an attorney that specializes in contractual matters that could arise in your startup. A contract attorney can help prepare or review user agreements, leases, and contracts you use with your customers, users, and vendors.
If you are in a heavily regulated industry or sector, you may need to hire the services of an attorney that specializes in corporate compliance. Lawyers that specialize in compliance can help you operate within the laws and regulations within your state.
You may need to utilize the services of a specialized attorney to handle your tax matters. Although you would typically hire an accountant to prepare your taxes, an attorney can help you register and remain compliant with federal, state, and local tax guidelines and provide advice on complicated tax matters.
Depending on the nature of your business, you may also need the services of a real estate attorney. Real estate attorneys can provide advice and help with buying and selling real estate as well as reviewing and negotiating leases.
Big vs. Small Firm
One decision you will need to make is whether you want to work with a big firm or a small firm to represent your startup. There are some pros and cons to both, and this is really a “fit” decision as well.
While working with a big firm, you may have access to a large number of lawyers and find a one-stop-shop with all of the benefits, including the various specialties that your startup needs as it grows. Larger firms are also typically better connected and have more influence and authority. However, you should also expect to pay more at a big firm, as they tend to come with greater overhead and charge higher hourly rates.
On the other hand, when working with a small firm, you may receive more attention and more personalized legal support at a lower cost. However, your lawyer may not be able to meet all of your unique legal needs. Few sole practitioners or small firms are experts across the spectrum of legal support that many startups need.
What to Ask a Startup Lawyer
The fit between you, your startup, and the lawyer you choose is extremely important. You should perform your due diligence on a lawyer just as you would an advisor, co-founder, or investor. So, when considering hiring a startup lawyer, it is perfectly acceptable to ask questions to make sure they are the right lawyer for your startup.
We encourage you to speak to several lawyers and firms for legal representation. There are many good startup lawyers to choose from, and a few of these conversations will undoubtedly prove to be good for you and for your startup.
Here are the questions you need to ask:
Do you have experience with startups? It is critical that your attorney has experience working with other startups, preferably startups similar to yours. Your lawyer should be able to guide you through your startup journey from formation and incorporation to raising capital and ultimately exiting through acquisition or IPO.
Do you have experience in the areas we need? Your lawyer should specialize in, or at least be familiar with, the areas of law in which you have the greatest needs. For example, if the core of your business involves intellectual property, you will want to choose a startup lawyer who specializes in IP.
Do you have experience with other clients in my industry? Your lawyer should have experience and be familiar with your industry. While you may want to avoid hiring a lawyer that represents one of your competitors, your attorney needs to understand the legal and regulatory environment of your industry in order to understand your legal needs and provide you with sound counsel.
How well are you connected? Your startup lawyer cannot specialize in everything. When you encounter legal situations outside of your attorney’s expertise, you want him or her to be able to refer you to someone who is an expert.
How do you communicate with your clients? It is important to understand how your lawyer will communicate with you. You want to work with someone you can get a hold of and who returns your calls or emails within a reasonable amount of time.
How does your fee structure and billing work?
There are many ways that lawyers handle billing. It is important to understand upfront their fee structure, how their billing works, and how flexible they are in their billing. Many lawyers that are accustomed to working with startups are flexible in how they bill startups. If you believe another fee structure or billing method would work for you, don’t be afraid to ask. And don’t forget to get any agreement in writing. This will help avoid any confusion or problems down the road.
How Much Does a Startup Lawyer Typically Cost?
Determining the cost of a startup attorney is important as these costs can vary greatly depending on the attorney or firm and the complexity of your needs.
There are a number of factors that will influence the cost of a startup lawyer, including the size and reputation of the firm, the complexity of the legal support you need, who is working on your legal matters, and how they spend time working on your behalf.
The cost of legal advice and support can range from a $40 to $50 flat fee for online legal services to $1,000 or more per hour for a senior partner in a reputable firm.
Additionally, lawyers use a variety of different types of retainers and fee structures, so it is important to understand what you are agreeing to and what your options are when it comes to fees for legal services for your startup.
Because costs can be a big deterrent to hiring a lawyer, it's important to know in advance how much you can expect to pay for the services of an attorney.
Lawyer Fee Structures
- Hourly Billing: Many lawyers bill by the hour (or fraction of an hour) that the law firm works on your behalf. This may include differing fees depending on who is working on your case. For example, the hourly fees for work performed by a paralegal, a junior associate, and a partner would differ greatly.
Most lawyers who use hourly billing will ask for a lump sum payment upfront. This is known as a retainer. The firm will then draw from this retainer as work is performed until the money that was placed into the retainer is used up.
- Monthly Billing: Some lawyers provide an option where you are billed a monthly subscription fee for access to routine legal review and advice. This is sometimes known as prepaid legal insurance or prepaid legal memberships.
There are many different types of memberships for legal services out there. Many of these services provide unlimited document, letter, and contract reviews as well as free or discounted consultation with in-network attorneys on routine legal matters.
- Flat Fee Billing: For routine services, such as filing for a business license or reviewing a contract, some lawyers charge a flat fee per service, no matter the time involved. For example, drafting and/or filing founder’s agreements, incorporation documents, confidentiality agreements, bankruptcy, and patent applications may all be considered routine services to attorneys who specialize in them and might be billed as a flat fee.
When agreeing to flat fee billing, make sure to find out what is and is not included. Filing fees, court fees, and processing fees can add up to hundreds of dollars and are often not included in a flat fee.
- Contingency Billing: Another fee structure used by some attorneys is contingency billing. Contingency billing is billing tied to the outcome of a case and is most often used in matters of civil litigation such as negligence, malpractice, and personal injury.
In these instances, attorneys representing the plaintiffs often take on cases at no upfront costs with an agreement that they will receive a portion of the judgment or proceeds of a case should they be successful. Although the fees can vary by case, the typical fee is around 33%. However, should the attorney lose the case, they often receive nothing at all.
Red Flags to Watch for in Startup Lawyers
There are several warning signs to watch out for that you may be dealing with a lawyer that isn’t a good fit for you and your startup.
- They don’t understand your business. Your startup attorney should understand your startup and your industry. You don’t want to pay your lawyer to learn on the job. If a lawyer does not have experience with startups and/or other firms in your industry, he or she may not be able to adequately provide you with the guidance and advice your startup needs.
- They are not good at communicating. You should be able to get in contact with your attorney within a reasonable amount of time and be provided with advice and guidance that you understand. If it is difficult to get in touch with your startup attorney or they don’t take the time to explain things in a way that you understand, you should look for a lawyer who communicates in a way that meets your needs.
- They are sketchy about their fees. Beware of lawyers who are not upfront about their fees and billing methods. You have the right to know who is working on your legal matters, how much they charge, and how long they expect to work on your behalf. If you start receiving surprise bills, it might be a telling sign you need to switch attorneys.