When Should Your Startup Hire A Lawyer?
One of the biggest questions startups deal with is when to hire lawyer. Is it too early? Is it too late? When’s the correct timing? You never want to be too late because well, it will be too late! On the other hand, hiring too early can kill your funds. I’m not a lawyer, nor do I know much about law, but I have close friends that are lawyers.
The reason why lawyers are important in the startup world is because you will be surprised how much legal mistakes your product is making. For example, if you were to create a music app, do you have the correct licensing? Are you even aware that you need it? Those are some small mistakes that you might not have problems with in the beginning, but will catch on later on. In other words, it’s never too early to have a lawyer.
You should never get an in house lawyer early. Actually most startups don’t even hire legal individuals until later on. It is much cheaper to outsource your work. Most startups tend to outsource their Human Resources work along with legal works. You actually want to consult a lawyer as soon as you have your idea running. You could try calling multiple lawyers if you are still in the early phrase and still which ones offer free consulting. Many of them actually offer to help for free because they know that you will go back to them in the future when you need it.
This is part where a lot of startups go, “I’m screwed.” We’ve seen startups run into problems like this before. I’m not going to mention it’s name, but there was a startup that got into deep trouble with music licensing. Eventually they were able to fix everything back up, but the downtime that they had scared off many investors. In the end they ran out of funds and had to close its doors. This teaches us to not wait too long before consulting an attorney.
Usually after a big funding round, your startup will start to hire a few in house legal professionals. Generally you won’t have too much paperwork before you get to the next stage. If you are planning on joining an incubator, then usually the incubator will take care of all the legal work for you such as incorporation and so forth.
An alternative path is to recruit an early legal advisor to join your forces. Legal advisors work the same way as a regular technical or management advisor. They both won’t be there 24 hours 7 for you, but they will most likely be there when you need it. Since the early stage won’t involve a lot of legal paperworks and legal advice, it is best to set a monthly call with your legal advisors. Like the other investors, advisors take a part of your equity.
If you haven’t consulted a lawyer already, consult one now. It is never too early, but it can be too late.
The SBA has a good introduction guide to law for your business: