Venturing into the business world without a lawyer is a bit like driving a car with faulty brakes. You may succeed in getting where you’re going—but the unnecessary damage along the way will probably cost you.
The Playbook contains a number of topics devoted specifically to legal issues of emerging companies: choosing the right business structure, protecting intellectual property, drawing up contracts and agreements [link], and complying with state and federal regulations. We’ve also addressed the issue of whether to hire in-house counsel or employ an attorney on an as-needed basis.
In this article, we’re assuming that your emerging business does not have the budget for a lawyer on staff. But still you should have the benefit of a legally trained advisor to help with your strategic plans. Having a lawyer on your team can help in three ways: risk management, networking, and strategic vision.
Risk management is the most obvious, so let’s start here. Lawyers are trained to spot potholes in the road long before you encounter them. In fact, the best lawyers for start-ups are the ones who specialize in emerging businesses—in your industry. So presumably they’ve been down your particular road many times already.
For example, they can spot a particular term or clause in a “standard” employment contract that caused trouble for other clients—and advise you on how to fix it. Or, if you are planning to grow your business significantly, a good start-up lawyer can advise you on how to structure your compensation and benefits, right from the beginning, so there won’t be a problem granting company stock to friends-and-family investors when the time comes.
In fact, many lawyers are so good at risk management that they end up frustrating business owners—because it seems like they say “no” all the time. By definition, entrepreneurs take risks. That’s why it’s important to find an attorney who understands your risk profile and gives you the right amount of leeway and support.
Networking may not be the first thing that comes to mind when you think of attorneys. But consider that lawyers who specialize in start-ups also get to know—and work with—bankers, investors, accountants, and other professionals who are in the ecosystem of emerging businesses. If your attorney is the social type, you may get tips about relevant conferences, or invitations to meet and swap information with other clients.
Strategic vision: The best start-up attorneys understand the potential of your business idea within the context of your industry and the current and emerging business environment. They help you envision realistic short- and long-term goals and have an idea of the path you’ll have to take to achieve them. Many start-up attorneys choose their specialty based on their affinity with innovators, so it really is possible to find one who can support your strategic vision. Business owners in this situation say it is like having a second mentor—with legal skills and experience.