One of the common mistakes I see entrepreneurs make – and I made it myself starting out – is thinking that once you have waded through the various recommendations for law firms, met a few lawyers, recovered from sticker shock, and chosen a firm to set up your corporate entity (LLC, C-Corp, S-Corp, sole proprietorship, whatever), you’re done. You just need to wait the flood of paperwork requiring your signature.
But you’re not! You are only half way there. That law firm, you have retained for your firm works for the firm not for you nor your co-founders. They are paid for by the firm, not by you and are obligated to put the needs of the firm ahead of anything else, including the wants and needs of the founders.
So what now? You, as the founder or founders, need your own attorney who will be paid for by you and will look out solely for your interests. Why? Because it’s an unfortunate fact that often in the startup world the needs of the firm and the needs of the founder(s) start to diverge. The classic cases are around such things as replacing the CEO with a “professional manager” or selling the company. You want to make sure your attorney carefully reviews and vets any agreements you sign with the company, such as the stock agreement, a non-compete, or a personal contract before those agreements come into play.
In some cases you may want to have your attorney negotiate with the firm’s attorney over any issue where there’s a conflict – a real difference that makes a difference, not some minor wording issue.
So a dollar invested in your own personal lawyer from the get-go may pay off in $10 or far more more sometime in the future. Your personal attorney is like your home insurance policy. You certainly hope your house doesn’t burn down, but if it does you need to be sure that your policy fully covers your losses. Otherwise that policy can sit safely and quietly in the file cabinet. And you hope there it stays.