Founders: Who Does the Lawyer Represent?

The answer to this question seems obvious, but sometimes it’s not exactly clear who your company’s attorney can and can’t represent.

This issue came up during a conversation with a friend the other day. He was concerned about some funding issues involving a co-founder. He ended the conversation by saying, “well, I’ll just ask our lawyer about it.” That’s when I stepped in and asked:

Does your lawyer represent you?

It is common for business owners to assume that their business attorney can also advise them on personal matters. And it’s just as common for the business’s lawyer to give them some personal advice. But conflicts of interest arise when founders begin asking the attorney for advice as it relates to other founders.

Clarify the relationship in the engagement agreement.

You should always get an engagement agreement from your business attorney. The engagement agreement (or engagement letter) should clearly explain the duties of the attorney and to whom the duties are owed. In short, it should be clear from the agreement that the business is the client, not the individual owners.

The business is the client.

If you need legal advice, you should retain your own attorney to represent your interests to the other founder(s).


Originally published at www.lindseyfirm.net.

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