We May Need a Lawyer for That - Typical Legal Needs for a Startup

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[authors: David McMahon & Jeevan Subbiah]

Second in our series How to Select New Counsel and Manage Legal Fees

At some point when an idea grows into a business opportunity you will need a lawyer. Here are some typical legal needs you may have in a startup company:

Entity Formation

A lawyer can guide you through the risks and benefits of entity formation, including a corporation or limited liability company (LLC). You may need to discuss liability, tax treatment, business organization, government filings and disclosures, methods to raise capital, investor risk, government regulation and drafting the necessary paperwork for filing.

Contracts, Licenses and Non Disclosure Agreements

A company founder may want to hire employees such as a Chief Operating Officer (COO) to help grow the company. A lawyer can help draft employee contracts and determine issues such as company ownership, stock shares and salary. A business may also need to draft contracts between suppliers, distributors, other businesses, and clients. 

Your business will also need to apply for relevant licenses and permits. While you may be able to complete the applications yourself, a lawyer can help you navigate various licensing requirements.

You may also want to draft a non disclosure agreement (NDA) regarding confidential information about your products and your company. Many venture capitalists (VC’s) and other parties may have policies against signing a NDA during early stages of discussions. You may need advice on these issues in particular.

Intellectual Property and Licensing

You may want to register your products and services for federal patent, trademark and copyright protection as well as secure your rights from contacted entities or agree to joint rights with a developer. This type of work will need an intellectual property specialist. You will need to determine the type of intellectual property protection you need (such as a trademark or provisional patent) against the cost of securing each type of protection. A company may also be involved with licensing of intellectual property rights for equity (for example, technology created at a university) or need to develop licensing agreements with other companies.   

Taxes, Records & Insurance

Your business may need to register for a federal and state tax identification number and you should become aware of the tax implications of your business transactions

In addition, it is important to maintain records on your workers (employment status, name, social security, time worked, overtime, etc.) and insure your company and workers. An attorney may be able to provide you guidance on these matters.

Employment Manuals, Holidays, Benefits

Perhaps the founder and the COO did not prepare any written formal employment practices, rules or guidelines. Before hiring future employees, you should have an employee manual prepared that includes key information such as company holidays, work procedures and criteria for successful employment and potential termination that complies with state and federal employment laws.

In addition, it is important to determine what benefits (such as 401k plan, health plan, dental, vision, and bonuses) will be offered and their relevant requirements.

Leasing an Office

Your company may move into a formal office. It is a good idea to discuss leasing your office with an attorney, especially before signing a long term contract (with an option to renew). You may also be able to find city, state and national incentives to rent in redevelopment or historic districts, such as the “Twitter tax break” as part of the Mid Market Redevelopment Plan in San Francisco. Your lawyer can help you negotiate your lease and also make sure that standard tenant rights are included or strengthened.

Dealing with Your Attorney – Litigation Management

The issues referenced above can grow into significant legal bills and related expenses. Before going down that path it may also be helpful to consult additional legal counsel to assist you in getting procedures in place to make sure that your lawyers are working efficiently and that the bills are reasonable.

Next Post – Selecting Your Attorney

Selecting your attorney can seem like a daunting process. In the next post we will discuss some key areas to inform you about the process and guide you towards making a good decision.

Dave McMahon can be reached at (415) 743-3706 or by email.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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