Blog Post

Why You Should Hire a Startup Lawyer?

Starting a small business is an exciting career step, but also an intimidating one that requires you to navigate uncharted territory. This leaves you vulnerable to making honest beginner’s mistakes. And if these mistakes are in violation of state and federal law, brace yourself for some hot water.

The best way to avoid violating the law unknowingly is to hire a start-up lawyer who understands your state’s business laws and best practices inside and out. Working with an attorney will help you better understand the ins and outs of small business law. How exactly can hiring a startup lawyer to ensure that your startup launch is a smooth one? Let us count the ways:

Avoiding Death by Taxes

No two start-ups are alike, but there’s one thing they all have in common: at some point, every business will have to pay taxes to local, state, and federal authorities.

If you either don’t pay your taxes properly or neglect them entirely, you will quickly find yourself on bad terms with the IRS. And being on the IRS’s watchlist is one of the worst places to be, not to mention one of the quickest ways to lose all the start-up revenue you worked so hard to earn. This alone is reason enough to enlist the expertise of a start-up lawyer.

Additionally, start-up lawyers will be able to identify when you are paying taxes for the same item twice, a common mistake that novice business owners make.

Checking Availability

Before you can set up shop and introduce your start-up to the world, you must check into the availability of:

  • Your desired start-up name
  • Your marketing tagline
  • The building in which you want to run your daily operations

If you inadvertently steal a previously trademarked business name or slogan or move into a building without settling all the potential zoning issues, your start-up could be in big trouble before you even get started.

Having a start-up lawyer providing you with legal advice will help you avoid stumbling out of the gate so you can hit the ground running.

Determining Your Business Structure

Once you’ve settled on a creative name for your startup and location, your next step is to obtain a business license. This means establishing your business structure by choosing from the following options:

  • Corporation – Sometimes referred to as a “legal person,” a corporation is an entity recognized by the state as being distinct from company owners. Corporations are granted many of the same legal rights individuals receive, such as the right to enter into contracts, own assets, loan and borrow money, sue and be sued, hire employees and pay taxes. 
  • Limited Liability Corporation – An “LLC,” as it’s commonly known, is a corporation in which the company’s owners are not held personally liable for any taxes or debts the company incurs.
  • Partnership – This is an arrangement between two or more parties to enter into business together and share the resulting profits according to previously agreed-upon shares. 
  • Sole Proprietorship – This is an unincorporated business with only one owner who pays personal income tax on any profits the business earns. 

If you choose an option from the above that doesn’t suit your business structure, you could end up being liable for taxes and business debts you didn’t even see coming.  Thus, it’s vital to assess your start-up’s goals and finances in detail with an expert start-up lawyer before you make a decision.

Your start-up lawyer can also help you issue stock options to your fellow shareholders and employees, a common action that small business owners choose to take the following incorporation.

Setting Up Your Insurance Properly

The mere existence of a start-up automatically brings with it a host of insurance liabilities. As the owner of the start-up, you’re responsible for obtaining proper insurance to cover:

  • Slip-and-fall accidents endured by customers who visit your start-up’s brick and mortar location
  • Slip-and-fall accidents endured onsite by your employees
  • Various employee claims, incidents and disputes
  • Any physical products you sell or equipment that gets utilized as part of your daily operation
  • Automobiles, if your start-up operations require deliveries or the transportation of people and/or goods

Unfortunately, your start-up’s multiple insurance needs can’t be covered by a blanket, one-size-fits-all plan. You have to purchase several different plans.

Thankfully, start-up lawyers know business insurance like the back of their hands and can offer invaluable advice as you select the right plans for you and your company.

Drawing Up a Partnership Agreement

If you’re starting your company in association with a business partner, chances are that this partner is one of your best friends who has a vision for the start-up is aligned with yours, you can’t imagine having irreconcilable differences about its future. Mark Zuckerberg and Eduardo Saverin once felt the same way about Facebook. 

You never know if and when you and your business partner will have a falling out. And if a fallout occurs when there’s no partnership agreement in place, it’s already too late. The total migraine of litigation becomes your only option.

Thus, you need to prepare for this rainy-day scenario from the get-go by working with a start-up lawyer to address important arrangements between you and your partner that negate the need for litigation, such as:

  • Division of responsibilities
  • Profit-sharing
  • Equity splits 

Protecting Your Intellectual Property

Most aspiring entrepreneurs’ worst fear is that someone else will hijack their prized start-up idea and reap all the rewards while leaving them with nothing to show for their hard work. If you don’t protect your idea with proper legal documentation, this nightmare could become your reality. 

A start-up lawyer can offer key guidance in facilitating the filing of patents as well as applications for copyrights and trademarks. Additionally, your start-up lawyer will ensure the careful wording and distribution of confidentiality agreements to anyone you speak to about your start-up idea.

Advising Your Handling of Employees

Hiring employees to work for your start-up invites an exhausting laundry list of legal issues, such as:

  • Obtaining an Employer Identification Number (EIN) from the IRS
  • Finding a balance in which you run thorough background checks on prospective employees without invading their privacy rights
  • Drafting employee agreements that clearly spell out all the terms and conditions of employment, thus protecting you from most employee-related disputes or incidents that may arise
  • Ensuring that you follow compensation laws to the letter
  • Understanding the crucial difference between what constitutes an employee vs. an independent contractor

Even a slight miscue with any of the above could land you in trouble with the IRS, or even worse, in court. Having a startup lawyer handy removes the fear of attracting a damaging fine or lawsuit.

Overseeing Your Startup’s Funding

It’s impossible to build a startup with no money. The only way a start-up can take-off is by securing upfront capital. This funding can come from a wide variety of sources, each of which will come with its own unique legal specifications. Such funding sources include:

  • Traditional banks 
  • Online lenders, 
  • Independent “angel investors” 
  • Crowdfunding
  • Friends and family 

A start-up lawyer from a reputable law firm is likely to have extensive experience representing entrepreneurs and investors alike. This makes them particularly adept at helping you negotiate pivotal matters such as your investors’ voting rights and stake in the start-up, a crucial negotiation that could save you from getting bilked out of future revenue.

As a bonus, your start-up lawyer’s past working relationships may have introduced them to trustworthy investors that they can put you in touch with.

Setting Up Your Banking

Speaking of finances, you’ll need to open a bank account to house your start-up’s assets. You may also find it advantageous to ask your bank for a line of credit to help you cover the necessary start-up costs.

A start-up lawyer’s business acumen will be indispensable in helping you find the bank and account type that best suits your startup’s needs.

Remaining Compliant With Regulations

It’s likely that your start-up will have to remain in good standing with some regulatory bodies like the SEC, FTC, FDA, etc. And each of these organizations operates according to thick rulebooks filled to the brim with mind-numbing legalese.

Having a start-up lawyer in your corner guarantees that your start-up’s daily operations always comply with the necessary regulations, and that you avoid the substantial fines that result from compliance issues.

Drafting Language For Your Website

Nowadays, if your start-up doesn’t have a website, you might as well not exist. And regardless of whether you see it as creepy or clever, that website will collect user data from all visitors in order to learn more about their consumer behavior, information that legally must be disclosed via an official privacy policy statement. 

Additionally, it’s a smart idea for your website to present visitors with:

  • User Agreements – These layout the code of conduct that website visitors are expected to follow.
  • Disclaimers – These are important for removing your business from any liabilities stemming from a website visitor clicking a third-party link.

Both of the above online statements should be drafted by a start-up lawyer who knows all of the legal terms that need to be included.

Running the daily operations of a new start-up is difficult enough as it is. Why waste your valuable time and energy, not to mention put your start-up’s good standing at risk, by struggling to address legal matters far outside of your element?

Put a start-up lawyer from a reliable law firm to work so that you can put your mind at ease. To learn how to secure a startup loan, which legal documents you need, and other legal advice, visit our website or talk to one of our experienced attorneys today.


“This blog article is for informational purposes only, and is not a substitute for client- and fact-specific legal advice from a qualified attorney.”



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