Entrepreneurs: Hire a Lawyer

I haven’t blogged much about entrepreneurship lately but I got the “itch” to do so as I was reading a thread of emails on the nextNY list about an entrepreneur who was thinking about hiring a lawyer for an employment contract.

There are a few times that a startup should seek counsel when putting together documentation:

1. Founders Agreement
2. Corporate Entity Setup (LLC, C-Corp, etc)
3. Employment Agreements
4. Term Sheets (when negotiating, etc)
5. Notice I’m not saying patents here, as there are always ways around them. If you DO file a patent, then seek legal help as well.

One thing my father always taught me was if you are going to do something, you might as well do it right the first time. I can’t tell you how many entrepreneurs I meet with try and cut corners around legal. If you are putting together ANY agreement, please seek counsel. Yes, it costs a bit of money, but in the end, it will be well worth it. You can read any book you want from Borders or read as many blogs you want too about negotiating term-sheets, but there are many reasons why lawyers have jobs and they are great at what they do.

I’ll admit that as an entrepreneur, I hate seeing legal fees build up, but over time, they are well worth them (if you select a good lawyer of course)

In terms of employment law, also seek out legal counsel. When you’re negotiating your stock options, salary, non-compete, etc – legal certainly helps. Remember, counsel does not have to be in the “front” – meaning, they can act as advisors and be silent. If it makes sense for them to emerge, then they will at the right time.

If you are starting up a venture and cannot afford legal fees for the above agreements, then I’d seriously question the future of the venture. Do things right the first time. Legal mistakes upfront can ruin a business (investors won’t invest) or they will cost a multiple to straighten out down the road.

Darren Herman is a digital media enthusiast and serial entrepreneur. Herman writes about technology, entrepreneurship and digital media at his blog, http://www.darrenherman.com.