3 Key Questions answered regarding the role of Lawyer in a Startup

Any business in whatsoever field cannot survive without these two professionals: an accountant and a lawyer. The reasons for hiring an accountant are pretty obvious — you need someone to help you set up your accounts and prepare all of your necessary federal, state and local tax returns. The reason for hiring a business attorney may not, however, be so apparent.

A good business attorney will provide vital assistance in almost every aspect of your business, from basic zoning compliance and copyright and trademark advice to formal business incorporation and lawsuits and liability.

Q1. What exactly is the role of a lawyer in a Startup?

At the most basic level, start-ups need lawyers to help them deal with three groups:

• The government. You don’t want to violate laws. You also need to be sure you are doing business in a way that doesn’t create unnecessary tax liability and that you pay the taxes you owe.
• Third parties and the public. It’s essential to make sure you take reasonable steps to control risk in your interactions with customers, suppliers, users, employees, and the general public.
• Each other. When multiple people form a company together, it’s best to establish the rights and expectations of the founders upfront in case there are disagreements down the line.

The most likely times for start-ups to get lawyers involved include:

• Incorporation and forming a business entity
• Hiring employees
• Negotiating contracts with customers and suppliers, including establishing terms of service for websites and license agreements for software
• Raising capital
• Obtaining patents (for some companies)

Q2. What legal priorities you should focus your lawyer on?

• Establishing a business entity of some sort (LLC or corporation) to protect you personally from business liabilities
• Establishing the ownership and equity rights of the company if there are multiple founders
• Ensuring the business’ intellectual property is protected and owned by the company (especially if it is being developed by independent contractors)
• Making sure you are paying attention to the tax consequences of what you do, particularly when it comes to granting people equity

Q3. What entrepreneurs should be aware of when working with a lawyer?

• It should always be kept in mind that the lawyer you’ve chosen needs to know in and out of the business you deal with and specializes in the same. It really is necessary that he speaks the language of that very business.
• A lawyer who seems to be learning how to do something on your dime. If you feel like your lawyer is doing something completely new to him, it’s unlikely he will be able to do it well or cost-effectively.
• And finally, a lawyer who surprises you with extra cost. All clients want cost-effective solutions, so it’s important to have an understanding of what something will cost and keep surprises to a minimum.

About the Author

This article has been written by our Guest author — Rudraksh Durrani. Rudraksh is a law student at Rajiv Gandhi National University of Law, Punjab.

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