Starting your own company can have great perks.
You are your own boss.
You get to control your hours.
Great, right? Some budding entrepreneurs rush into the whole start up process and go right at the "business" aspect of their company.
Well, one step many entrepreneurs forget to do is hiring a lawyer.
The image of a lawyer is usually intimidating for most entrepreneurs.
They avoid using them as much as they can.
Many think that it will be very expensive.
I know that when I started my first company, entering into those fancy offices and grand conference rooms seemed extremely intimidating.
But, trust me, in the long run it's the right choice.
Here's how lawyers can help you: Market knowledge.
You know your product or service.
I'm guessing you have also done a fair amount of research into the market you want to enter (hopefully, if not stay turned for my upcoming guide on market research).
But do you know enough? A lawyer familiar with your industry has already acquired a depth and breadth of knowledge that would take years to match.
Tapping into that knowledge is a wise investment in your business.
A good lawyer will be able to tell you if the moves you are contemplating are wise, from a business and a legal perspective.
Validity of transactions.
Once you decide to proceed with your start up, you will be making transactions with other people.
Perhaps it will involve issuing stock, or creating contracts with partners and employees.
At these crucial junctures, you will need an experienced person to create or look over your agreements.
At these times you should seek guidance from a lawyer.
He or she can help you decide if a transaction is actually in your best interest.
A lawyer can also ensure that a certain transaction won't hurt you in the future.
That assurance alone can be invaluable.
Legal compliance.
There is almost no way for you, as a non-lawyer, to know about every law and regulation that affects the industry you want to get into.
There are several different areas that are vital to your business' success.
You may find yourself making costly errors.
When, for example, you are bringing in investors, incorporating your company, or dealing with your former employer's claims on your new venture, you need to be sure you are on solid legal footing, have filed the correct paperwork and paid the correct fees.
Intellectual property.
Suppose you begin to develop an idea with two friends.
A few weeks into the process, one friend loses interest and drops out.
The two of you that are left to develop your idea into a sellable product.
Finally, the money starts coming in, and life starts improving.
Then, you are hit with the lawsuit.
Your "friend," the one who left, is claiming that you were working with his idea.
Now he wants your share of the profits, even though he really had nothing to do with your success.
Unfortunately, this happens all the time.
A lawyer can tell you what you need to do to make sure someone doesn't take credit for your idea.
That may involve patents, or having someone who leaves the company relinquish their rights to future profits.
You will need to know about IP rights assignment and non-disclosure agreements (NDAs).
Forming a corporation.
At some point, you will need to form a legal entity, either by yourself or with the people who are working with you to develop this idea.
But all corporations are not created equal! And you have several options that serve different purposes.
All of them provide some tax and liability protections.
But you can't be expected to know which of them best fits your business.
However, this is usually where a good corporate lawyer is useful.
He or she can look at your specific information, ask several questions, and tell you not only which setup best fits your situation, but which state to file incorporation papers in.
(Some states, like Delaware, are much more corporation-friendly than others! And often preferred by investors but what are the pros and cons and costs involved).