You’re going to be rich. You have a plan that will revolutionize an industry. Everything is coming together well, but then you stay awake at night asking yourself a defining question: Do I need a lawyer? Every startup will go through some form of legal issues, whether it be a simple formation of the business or signing a contract.
If you plan to seek investors, this will call for a lawyer, too.
Unless you’re a lawyer, and even if you are, you’ll need to hire a business lawyer with the expertise you need to ensure your startup is on a solid, legal foundation.
The reasons your startup needs a lawyer are simple:
1. Business Formation
Before you dive too deep into your business, you need to structure your entity properly. You can effectively switch entities in the future, but this is a major hassle. You want to move forward with your business in the most responsible way possible.
Should you organize as a corporation or an LLC?
Maybe another business entity will offer more benefits for your business. Once structured, there will be other legal questions and concerns a lawyer will be able to answer, such as:
- Do I need a buy/sell agreement?
- How do taxes work?
- What contracts do I need?
- How do I make an operating agreement?
You’ll need to work closely with a business lawyer and/or an accountant who can help you form a business on a solid foundation for success.
2. Hiring Employees
Your startup is doing well, and it’s time for you to put your entity on the path of growth by hiring a new employee. This is an exciting time, but when you bring on an employee, you’re going to deal with a lot of new regulations that will make your operations more difficult.
You’ll need to meet federal and local standards.
If you’re an innovative food company, for example, you need to make sure that your employee is given a set of procedures to keep your food area up to code. You’ll need to designate someone for safety (probably yourself), and your lawyer will be the protective barrier between you and costly violations.
A lawyer will:
- Ensure you maintain compliance
- Discuss hiring options with you
- Draft employee contracts
And this is just the start of what a lawyer can offer. Your business will rely on contracts, and laws and regulations will come into existence that you’ve never even heard of. Legal language is also very confusing, so you’ll need to make sure you’re wording is just right to enforce a contract.
You don’t want to risk your business’s survival on a minor contract mistake.
Lawyers are invaluable when it comes to contracts.
3. Investors, Funding and Protection
A lawyer will be a vital cog in your startup’s expansion, and when it comes time to bring in investors, you can have your idea stolen or lose investors because you didn’t provide:
- Vendor contracts
- Regulatory filings
- Contracts and agreements
- Proper background information
Lawyers make your image look professional, and they provide contracts and agreements to investors. They can also help you read through and understand contracts you’ve been given.
Another protection a lawyer will provide at this potentially vulnerable time is:
- Non-disclosure agreements (NDAs) so that inside information is never discussed.
- Trademark and patent help to protect ideas from being stolen.
A lawyer can also overlook a potential investment to better help you determine if you’re signing on to a smart investment or not. Your legal professional will be a trusted advisor who waits by your side to ensure that you make all of the right moves to sustain solid and healthy growth for the foreseeable future.
If you’re not sure how a lawyer can help you, discuss your needs with one.
It’s always better to be safe than sorry when your startup’s future is on the line.