Many entrepreneurs and founders are hesitant to talk to an attorney for fear of the dreaded hourly billing or unknown costs. The other concern is that many people fear or don’t want to deal with lawyers, either because they don’t know what to expect or there have been bad experiences they have experienced or have heard about. That is why many people avoid getting initial legal work complete when they are working on a startup idea. I have discussed in a recent article about some of the problems and reasons why founders need to get quality business, financial, and legal advice very early on in the process (See Business Start-Up Toolkit- A Guide to Lean Startup Legal & Advisors). I have also discussed in a separate article what to look for in a startup attorney. People often resort to online document templates or avoid putting things in writing or use online incorporation/document services. These things can have their use and can save money; however, there are ways to get these things done properly and avoid mistakes that can end up being much more costly in the long run (also discussed more in the Guide to Lean Startup Legal above).
I put resources and educational material up to help people make wise decisions on when to save money on my websites and blog; however, I also try to put things together to help entrepreneurs at a reasonable price when they need to spend the money to get their legal work performed.
I offer a variety of flexible payment terms for start-up legal services and offer a flat fee start-up package for a total of $5,000 that includes all the following early and formation stage legal service/documents:
- Reserve a corporate name
- Incorporate or form a limited liability company
- Prepare necessary bylaws or operating agreement to provide how the company is managed
- Prepare all formation corporate consents and resolutions by shareholders and/or board, corporate records, and minute book
- Prepare and file Form SS-4 Application for Employer Identification Number
- Prepare and file a qualification to do business as a foreign corporation in the state in which the company is located (if applicable)
- Prepare form of Indemnification Agreement for officers and directors
I was reading an article in this month’s (June 2012) Entrepreneur magazine by Ann C. Logue entitled “Beyond the Handshake- Having a business partner can be valuable. Having the wrong-or no-partnership agreements can be disastrous.” It details the experiences I hear every day by founders, entrepreneurs, and startups. Most know they need quality legal and business advice in the early stages of their growth, but don’t want to spend the money on it. With the advent of online document and template sharing, discount legal document prep companies, and companies out there like LegalZoom and RocketLawyer offering low-cost or free legal documents, I very often hear and see the impact that is having. I have worked both in the trenches of many a cash-poor startup and also as an attorney advising these same type of companies or founders and wanted to give some additional guidance and solutions from both perspectives.
Education and information are some of the most critical areas for any start-up. They need to know their product, know their market, learn how to commercialize their product or service, and how to go from idea to a functioning business. I put together a handbook with some of the common areas operationally, administratively, financially, and legally in my Startup Bootcamp 101 e-Book (Click to download free pdf) to provide some basic education on those aspects of business start-ups. There are web resources that I have tried to compile as well at this Blog, but there are tons of resources in the form of books and online materials. Some recommended books are Venture Deals by Brad Feld, the Lean Startup by Eric Reis, and the Startup of You by Reid Hoffman. I will discuss some of the do’s and don’ts when trying to stay within a “lean startup” mentality, but also when you do yourself a disservice by trying to cut corners to save money.
My site pBeta.Us is in development to provide entrepreneurs, founders, businesses, and really anyone tools, resources, guidance, and a forum to discuss the development of their own permanent beta. P-Beta is a state of being fluid and constantly changing and adapting to your environment, the market, and your personal or business needs.
Reid Hoffman, co-founder of LinkedIn, in his recent book “The Start-Up of You“ describes how running a start-up can be compared to how individuals should approach their career progression. He uses the term permanent beta to describe the process of what start-ups use and people can learn from. Beta has several definitions, but the core has to do with measuring existing change or whether change needs to occur. In finance, beta often has to do with volatility of pricing, so measuring how much change is involved. In the tech world, beta is often the label applied to so-called “beta tests” where a computer product or software is launched in its current state to see if there are any problems with the software that need to be fixed and to get a reaction from the market to measure other aspects related to marketing as well. It comes down to being willing to and measuring change based upon current conditions and the marketplace.
One other issue people don't think about is the legality. If you put something online to promote your company for the purpose of getting investors, that could be considered an general offer to sell a security through general advertising or solicitation, which is prohibited in most cases under federal and state securities laws. That is especially the case if you put something like "our company is looking for $100,000 for 5% in the company" on the net.
There is this feeling among many founders and entrepreneurs that venture capital is the “dark side” and inherently evil. I have been very surprised to hear things like “we don’t want to go down the road with Vulture Capital” in the heart of venture capital in places like San Jose, Menlo Park, Mountain View, San Francisco, and Palo Alto. While I do agree that there are some bad apples, negative aspects of VCs and VC funding, and a general perception of VCs as sharks, I would argue that VCs are an invaluable part of the US economy and the use of VC funding has been extremely useful in the growth of many successful US companies.
Part of the problem is that people don’t understand exactly what VCs do and how VC works. The public only hears about a VC firm making billions off of an IPO and how VCs are like vultures that swoop in and take over the company and get rid of all existing employees. You can read my take on issues of company founders having a hard time giving up control here, but giving up some control is required in many situations to bring in the capital to make the company grow. Investors put money into a company to make money, not to make the world a better place. That is business 101.