Disclaimer: The following article contains practical advice that in no way represents actual legal counsel. Intended entrepreneurial recipients should consult an attorney at their own risk. Failure to comply may result in loss of productivity and/or financial resources.
Certain words persevere in the canon of tech entrepreneurship. Words like Resourcefulness, Passion, Spontaneity and Risk. None of which apply particularly well to paying wingtip-clad attorneys high dollars for assembling paperwork. Upon revealing this article’s title to a newly minted J.D. friend, he immediately blurted out “That’s how people get in trouble. You can’t just…”. I cut him off. Lawyers are constantly telling entrepreneurs what they CAN’T do, and founders already hear this plenty for free. Plus, encountering trouble is a necessary precursor to greatness, so it might as well be found early and on the cheap.
Too many deals have gone sour because nothing was put in writing in the early going. You can’t escape lawyers altogether, and sometimes you truly are best served seeking their services…for instance, when being reminded of your right to do so. But you can largely avoid them in running your business, and I strongly encourage you to consult your conscience and common sense before consensus and common law. Here’s why
1. Paralysis by Analysis
The main reason you hire a lawyer is to limit your exposure to risk. Ask one lawyer a question, get three opinions and two referrals. Give a lawyer two options, get a third. None of which inches you any closer to moving forward with the task at hand, which for a tech founder inevitably entails taking on gobs and gobs of unruly risk. Just as there’s no definitively correct way to design a website or write a blog post, there’s no one right way to structure an agreement. In fact, there are limitless options that will each change your risk profile in different ways, possibly alienating investors, vendors and partners in equally varied kind. Lawyers have a talent for making documents larger by making bank accounts smaller. Big documents raise red flags. Small bank accounts raise red arrows. A simple task becomes overly complicated.
There’s nothing nimble about a bunch of lawyers bloating an agreement – delaying product development and marketing initiatives to instead stress over minutiae unlikely to be encountered in the near term, if at all. Approach legal issues like a minimum viable product. Keep it simple. Go with your gut. Evolve periodically.
2. You Can Do It Yourself
Starting a company or professional partnership isn’t very hard. Succeeding sure as hell is, but simply making the entity official on paper without the aid of a lawyer should be the minimum required barrier to entry for the leaders of any new endeavor. If you can’t navigate the state’s procedures for filing a new LLC as a sole proprietor, save yourself the headache and just close shop before it opens. If partners can’t collaboratively create a document expressing their basic commitments to the business along with foreseeable dissolution measures, the outlook isn’t stellar for them either. No self-respecting bootstrapped lean startup would pay for templates and advice available for free on myriad sites, and painting the broad strokes yourself is a fantastic exercise in gut-check testing various eventualities as they relate to growing, dividing or ending the business. Other people have likely encountered your situation before, leaving the resulting language online. Beg, borrow, steal and augment.
3. Loss of Control
Lawyers have a tendency to hijack uncomfortable conversations. Once one side of a dispute decides they no longer possess the ability or inclination to represent their interests, the debate shifts from a short-list of differences to uncovering every possible issue hour-by-billable-hour. Lawyers love talking to other lawyers, because it means they’re making money. Through perpetually raising new concerns, lawyers build dependency by making clients feel naÃ¯ve to the limitless ways things can and will go wrong. Another disagreement rears its head. Another phone call to the lawyer. Another bill. A vicious cycle. Who’s running this company anyway?
I won’t insult Tech.li readers by redundantly pointing out that lawyers are expensive. Instead, a warning about the ‘free’ legal services of your friend or relative: Free legal help just leads to paid legal help. It’s not their fault. Lawyers are trained to over-complicate even the most vanilla of matters, which is a slippery slope leading directly to their colleague’s office ledger.
Take control of your business by using publicly available language to fulfill the majority of legal paperwork. Contracts are just a piece of paper detailing your obligations. Not something to be scared of. If you end up in court, it will be because somebody didn’t hold up their end of the deal at a high level, and lawyers will get their payday if you decide the disagreement merits the expense, which is actually a victory in a way, because it means you’ve created some value.
Until then, save your money.