Is It Worth Investing in Legal Advice for Your Startup?

If there is one thing that no startup needs, it’s additional costs. When getting a new business off the ground, it seems that everything costs more than you expected, and there is never enough money to go around.

Given that reality, most startup owners get into the habit of only spending money on things that are absolutely critical to move the business forward. The question we are going to address below is this – should you consider the cost of a startup business lawyer as one of those critical things that you should spend money on during the startup phase?

Take a moment to review the discussion below and reach out to Fisher Stone directly if you have any questions about our services and how we can help position your startup for a thriving future.

A Simple Answer

We’ll get further into the details in a moment, but if you are looking for a quick answer, here it is – yes, you would be wise to invest some of your available funds into legal advice for your startup. There are a ton of things to do in order to get a business off of the ground, but none of them matter if you are on shaky legal footing.

With a lawyer on your side for advice, you might walk right into a bad situation that could have been easily avoided. You should look at legal advice in this context like you would look at investing in research and development for your products or training for your team. It’s simply a necessary cost that should be built into your budgets both now and in the future.

Laying the Right Groundwork

One of the very first things a lawyer can do for your startup is determine what structure this new business can take. There are plenty of legal structures available in the U.S., from the simple sole proprietorship all the way up to a corporation. There are specific tax and legal implications for each, and you don’t want to select the wrong one as doing so can expose you to liabilities and cost you a lot of money in the long run.

It’s important to make sure your personal assets are protected from those of the business right from the start. As soon as you are doing anything that might be a bit risky and could open you up to liability, you need to make sure your business and your personal assets are two completely separate things. A lawyer will help you accomplish this objective and can answer any questions you have about forming your business properly.

In addition to picking the right structure, your lawyer will be able to help you remain compliant within that structure moving forward. The rules for what you have to do to operate a business legally depend on what structure you select – instead of navigating those requirements on your own, you can deal with them through the help of your lawyer and be sure you are in good standing.

Entering into Agreements

You’ll almost certainly need to enter into a variety of different agreements as you get your business up and running. These could be partnerships, they could be purchase agreements with vendors, or any of a number of different types of contracts. While you don’t technically have to have a lawyer on your side to sign a contract, you could be walking into a dangerous situation if you don’t put a professional in your corner to draft or review these agreements.

There are some common mistakes that are made when signing business contracts and your lawyer will help you avoid these outcomes. Specifically, you don’t want to end up signing a contract that contains a loophole that allows the other party to get out of the deal in an unexpected manner or leave you holding the bag financially.

You’ll always want to make sure that your contracts are sound enough to be enforceable in court, should that become necessary at any point in the future. Many new business owners like to operate in a way that assumes they will never wind up in a sticky legal situation – it’s great to hope for that outcome, but you can’t bet on it. With enforceable contracts that have been drafted or approved by a qualified legal team, you’ll be on much firmer footing.

Protecting What You Create

Is your startup going to be producing some form of unique intellectual property? Many new businesses in the digital age do exactly that, and protecting the intellectual property you create should be one of your top priorities. If you aren’t able to protect it properly and other, more established businesses are able to utilize it in some way for their own benefit, all of your efforts may be wasted.

You’ll want to have an overall IP strategy in place to make sure you extract as much value as possible out of each of the assets you develop. And, unless you happen to have experience in this area, you are almost certainly going to need legal guidance to develop such a plan. This could mean using things like trademarks and patents to protect what you make, but that’s really just the start.

It’s important to understand that protecting intellectual property is not a one-size-fits-all proposition. There are many different ways this can work, and you need to customize your approach to suit the plans you have for your products and your business. Working with a legal team that has experience in this space and can get to know your brand and your objectives is your best bet to avoid having regrets later.

Stay Compliant

As important as it is to protect your intellectual property, it’s just as important to make sure you are staying compliant within your market. Depending again on the type of business you are starting, there may be specific regulations that apply to how you can operate in that space. Some markets are more tightly regulated than others, with examples like healthcare and finance being two spaces that have many regulations to manage right from the start.

It can be overwhelming to attempt to manage compliance on your own. Even if you have a general idea of what is required in your space, it’s going to be difficult to get your arms around all of it while still having enough time to run and grow your business as you would like. This is another example of why investing in legal guidance is so valuable. With a legal team to support you, the compliance side of things can be outsourced while you keep making the decisions and working on the projects that are going to take you to the next level in the market.

There are also compliance matters to think about with regard to employees. That might not be at the top of your mind when you are just getting started and you are the only one in the business, but there will probably be others joining you soon enough. Complying with employment laws is extremely important and can help you steer clear of disputes with your workers down the line.

Secure Funding Safely

All businesses need money. There are plenty of different ways to fund a business, of course, but some of those are going to involve getting money from outside of the company – and for that, you’ll want to be sure everything is done properly to protect all parties. Unless this business is going to be entirely funded by your own savings, using a lawyer to help with things like investor agreements and structuring ownership terms is a wise move. The terms that you offer to investors at the start of your business could have a massive impact on what you get out of this venture later on, so you always want to make sure the contracts are fair to your interests.

You can never be too careful when taking money from an investor to help with the startup phase of your business. Everyone has the best intentions at the start, and you are only thinking about what will happen when this is a success. But what if it isn’t? What happens then? Or, what happens if the business takes off and your investor wants to take more control than you expected based on their investment? Everything needs to be laid out in black and white, as clearly and plainly as possible, in order to avoid frustrating disagreements later on.

An Essential Service

In the end, there are few things more important than pointing your new business in the right direction from a legal perspective. Leaving yourself open to legal issues moving forward will always hang over the business and will be something that you wish you tackled early on. By working with Fisher Stone, you can get legal services for startups at a great value and receive the advice and direction you need to make sure legal concerns don’t hold you back. We look forward to speaking with you soon.