Being a founder is hard. You have a million things you need to do, half a million things you’d like to do and often no money to do any of it. Unless you are an attorney, nothing is exciting about seeing a lot of time and money spent on addressing legal matters. So, as an entrepreneur, you find yourself tempted to spend the least amount of money and time on legal issues, wondering, can I do this work myself?
One is always free to take care of their legal matters without an attorney. Some issues do lend themselves to being easy to do without an attorney. For example, one is free to create a contract on their own to use for engaging clients and contractors. Many people do this when working with an app developer. However, too often, people who do this ultimately lack ownership rights in the app they create. Or, they find themselves liable for infringement as they gain traction with no recourse.
As a second example, one can easily incorporate their business with the State. However, too often, people pick the wrong type of entity for their business goals. Or they fail even to consider the other documents they need to prepare to avoid issues. These issues range from rules regarding corporate decision making, personal liability shields, and founder’s compensation in the long run based on the nature of their business.
These risks do not even touch other issues that impact startups. These issues include, but are not automatically limited to, Employee Agreements, Independent Contractors Agreements, Financing Terms, and Agreements, Obtaining and Protecting Intellectual Property, Avoiding Intellectual Property Infringement Issues, Safeguards to Distinguish Between Employees and Independent Contractors for Tax Purposes, Obtaining the Right Corporate Tax Structure, Setting Up the Right Data and Private Policy Safeguards and Protections and more. These issues can lead to lawsuits, which one should not handle on their own, and problems with investors during due diligence-and possibly not get financing and traction. These derail startups from scaling and can jeopardize the existence of the startup and any credibility of the founders.
An attorney’s purpose is to serve as a risk management advisor to a business. Their education and experience allow founders to avoid costly mistakes around:
- Incorporating, co-founders agreements, shareholders agreements
- Understanding data regulations
- Proper IP protections in contracts
- Systems to limit personal liability
- Employee agreements
- Document recording systems
- Tax compliance
- The right contracts for your specific business
- Business financing
- Privacy and end-user terms for your specific business
- And potentially more…
How can you avoid making these costly mistakes? There is no off-the-shelf solution to do this given the nature of how the law works. What it takes to avoid these mistakes is dependent on the business, the industry it is in, and the ways that industry operates and is regulated. Why spend the time as a founder trying to become a legal practitioner-a process that takes years of schooling and then countless hours of intensive focused practice. Focusing on building your business while engaging and learning with an attorney is a better investment of your time as an entrepreneur.
Further, attorneys provide two other benefits to your business. First, the right attorney provides your startup with community trust. This validation occurs because investors and other partners trust you have the right systems, policies, and terms to protect your business. These helps assure them that their investments of money and time into your company are protected. In the process, they can educate you on how to protect your business while connecting you with investors. Collectively, these actions accelerate your business growth while preventing you from dealing with unnecessary issues and cost in the long run. The investment in an attorney is cheaper than the cost your business pays in do it yourself lawyering.
Remember, an attorney exists to advise your business. You are the consumer, and with proper mentorship, that JumpStart can help provide, these relationships can be rewarding, empowering, and financially feasible.
Finally, if you do not have the cash to pay for traditional legal services, JumpStart can help by:
- Connecting you with in-kind legal educational programs and services provided by our partners
- Connecting you with free or reduced-cost legal services provided by local law firms. (Many law firms JumpStart works with are moving away from the traditional billable-hours model to assist entrepreneurs.)
- Connecting you with business advisement and education to help you strategically focus on building a business and timing when to invest in the right type of legal advice
If these, or other resources, interest you, please reach out to the JumpStart team. We are more than happy to work with you to transforms lives and communities.
This blog post is made available by JumpStart Inc for educational purposes. It provides general information but does not provide specific legal advice. By using this site, commenting on posts, or sending inquiries through this website or contact email, you confirm that there is no attorney-client relationship between you and either JumpStart Inc or any agent of JumpStart Inc. This blog is neither intended nor should be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.