Authors: Michael Perez and Elizabeth Norman at Touchstone Strategic Law
Lawyers can be like zombies, slow and predatory, insinuating themselves whenever possible. Coming into contact with one can be grave. It doesn’t have to be. The following are some tips to help you decide when you really need your lawyer and what their ideal role can look like.
Ownership of Your Company
If you’re working out who owns what, between you, your cofounders, or investors, then your lawyer can help. The ways the pie can be divided are nearly infinite. If you can imagine a scheme, then it can probably be implemented.
But it’s got to be implemented well, or down the road there will be conflict and lost resources resolving uncertainties. Major uncertainties about who owns what can scuttle future deals with investors or acquirers.
Lawyers have seen where things have gone wrong and have examples of where they’ve gone right. They can guide you about the tradeoffs inherent in the choices you face and create a pie that works for your startup.
Governance of the Company
A startup is like a miniature society with a nascent government. There are leaders, branches of government (C-suite, Board of Directors, etc.), and constituents. There are checks and balances between them.
A lawyer can be your guide to understanding who decides what about your company and whether they need signoff from another branch. We’re also good at papering those decisions, to minimize the chance of controversy later.
At the very least, a lawyer can give you a primer on how your company - whatever kind of corporate entity it may be - is governed and empower you to govern well.
Compliance
Every business has something they have to ensure remains legally compliant about their operations, and compliance can’t be outsourced entirely. Only your company can truly keep track of itself.
Lawyers are good at guiding you to set up the policies and procedures - the guideposts - for your compliance efforts. A really good lawyer will understand your risk profile and help you decide what level of compliance oversight is right for you, instead of just throwing the book at you and telling you to follow it.
Taxes
Annual income tax filings are an accountant’s bailiwick. As are basic filings related to payroll taxes and sales tax. No need for a lawyer, generally speaking.
Eventually, though, we want our startup to get big enough to be dealing with multiple jurisdictions and lots of money. When judgment calls with serious implications are at hand, that’s when a tax attorney can save you $$$$$$$$$. Sales and use taxes are a thicket of varied laws without a clear path through. The same goes for big contracts, investment deals, and acquisitions. For these major events, a tax attorney can make sure you aren’t walking into a big tax bill or even increase the size of your exit by helping structure the deal well.
Contracts
Contractual language is like software code. It takes input from the user and hopefully yields the appropriate result. Lawyers speak contract.
Some contracts you will get to know well and won’t need a lawyer to interpret for you. Others are either too complex or the stakes too high not to consult someone fluent in the language. That’s where your lawyer comes in.
Conflict
When conflicts arise with customers or team members, it’s really hard to remain calm and objective. You’ve got too much at stake. Sometimes egos (or at least feelings) are at stake, whether we like it or not.
Your lawyer is your objective voice, with perspective on your interests. They can safely deescalate while protecting your longer-term interests. They can also play bad cop, when you’d much prefer to play good cop.
Some Guideposts for Working Well With Your Lawyer
A good lawyer will consider the following when giving you advice:
Your vision for your company;
Your company’s culture and brand identity; and
Your bandwidth for dealing with something yourself.
Good solutions are tailored to how you operate and who you want your company to be. If your lawyer is just throwing a bunch of “you have to…” at you, without helping you think about how to make it work for your company, they aren’t helping you well.
A good lawyer can also help you DIY certain legal tasks, when an amateur-level fix is all you need at the moment. It’s like fixing something in your house. There are things you can do on a low budget. It depends on your risk tolerance. The key is deciding when you’re in over your head or when the stakes are too high to risk it. Your lawyer can help you think through that call.
Finally, lawyering can be agile - responsive to an evolving understanding of your needs. Sometimes a situation calls for an imperfect solution that can be put in place right away. Then it can be improved as you go. Like software accumulates technical debt, companies build legal debt. That’s ok. It’s something to be aware of, leverage, and fix when it’s time.
Hopefully, with all this in mind, you end up looking forward to collaborating with your lawyer. No need to run away (or stab them in the head).
About the Author - Mike and Elizabeth are managing partners at Touchstone Strategic Law in Boston, MA. Mike is a former startup cofounder and in-house counsel. Elizabeth comes from big law. Touchstone's mission is to help entrepreneurs, investors, and social entrepreneurs see their visions through.