How to Hire the Right In-House Legal Counsel (and Save Your Startup Money)
Timing matters (and earlier is better).
Photo: ColorJoy Stock
If you’re looking to hire legal counsel for your company, be careful. Just because you’ve found a lawyer who specializes in startups, doesn’t mean they’re the right legal counsel for you or your startup. Here’s how to evaluate whether a lawyer is right for you.
Experience Is Important
In order to reap the benefits of hiring an in-house counsel early, you need to hire the “right” lawyer. Look for someone who has worked in your industry, and if possible, in the particular type of business your startup is involved in, which will make their existing knowledge and experience transfer easily to the company.
The right lawyer should bring real-world considerations into any legal analysis and be able to assess and articulate risks without making a startup feel that all roads to achieving its business goals are blocked. If a particular course of conduct is deemed to be too risky to pursue, an in-house lawyer should be able to suggest safer alternatives to consider, balancing legal requirements with the needs (and vision) of the business.
Consider Culture Fit
Fit within your company culture is also important. Your in-house legal team should be adept at forming relationships with the other key members of your leadership team, so that they, too, see the lawyers as a helpful source of guidance and strategic input, rather than simply naysayers.
Timing Matters (and Earlier Is Better)
It is much easier for in-house counsel to be viewed by your management team as a “partner” and not a “blocker” when that person is brought into the conversation early and is part of discussions about the vision and path of the company. Bringing a lawyer on board when there are already fires to put out makes it harder hard to view them as the strategic partner they can be.
By bringing on the right in-house counsel early in your startup’s life, you can build a legal department that is not simply a “cost,” but a true strategic partner of the business. This paradigm shift can end up saving you money, angst, and reputational damage, and will ultimately lead you and your company to be more successful.
“By bringing on the right in-house counsel early in your startup’s life, you can build a legal department that is not simply a “cost,” but a true strategic partner of the business.”
—Amy Rowland, Founder of Varia Search
About the Author: Amy Rowland is the founder of Varia Search, a boutique legal recruiting firm that uses a bespoke approach to fill legal department roles. Prior to starting Varia Search, Amy was a recruiter at another legal search firm where she focused on recruiting for in-house legal positions. She has also held in-house roles at two international companies and a large New York City law firm.
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Ask an Expert: How to Get Legal Protection for Your Small Business
An attorney explains.
We’ve been spending a lot of time at Create & Cultivate HQ discussing how we can best show up for and support our community during this uncertain time. Community is at our core, and connecting with others through one-of-a-kind experiences is what we love to do. While the world has changed, our mission has not. We’re committed to helping women create and cultivate the career of their dreams, which is why we’re proud to announce our new Ask an Expert series. We’re hosting discussions with experts, mentors, and influencers daily at 9 am, 12 pm, and 3 pm PST on Instagram Live to cure your craving for community and bring you the expert advice you’ve come to know and love from C&C. Follow Create & Cultivate on Instagram, check out our Ask an Expert highlight reel for the latest schedule, and hit the countdown to get a reminder so you don’t miss out!
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Although we’re in the middle of a pandemic, there is going to be a large wave of new businesses. If you don’t take the time to protect your business now, you will end up spending 10-20x more money in the long run defending yourself.”
—Andrea Sager, a small business attorney
As a small business owner, or someone wanting to start a small business, there’s one part of your business you can’t ignore: LEGAL. In reality, it doesn’t matter what size business you are. No matter what stage you’re in, there are legal protections you must take into consideration if you want to keep the money you make.
Enter: Andrea Sager, a small business attorney shaking up the legal industry with her Legalpreneur plan which provides all-access to her firm for small businesses. Every day, she works with business owners who are on the verge of losing everything because they don’t have the right legal protections in place. Don’t let that be you.
Below are three ways you can protect your business during this pandemic and beyond, according to Sager.
Entity Protection
Sole Proprietor
It’s important for your business to operate as some type of legal entity. If you have not created a legal entity for your business, then by default, you are a sole proprietor. Sole proprietors get no legal protection for their business.
A sole proprietor is personally liable for the debts and obligations of their business. Personally liable means if your business owes a debt or is sued, then creditors can come after your personal bank account and personal assets. Operating as a sole proprietor is risky. It’s scary to be in a position where your personal assets are on the line. The good news is that setting up a legal entity will provide you with the protection you need. And it doesn’t have to be expensive or complicated.
Unlike a sole proprietor, legal entities provide personal liability protection for business owners. When you operate under a legal entity, if your business owes a debt or is sued, the creditors can only come after the business’s bank accounts and assets, not your personal bank accounts and assets. It’s nice to know that you’re not at risk of losing your house because your business fell behind on some payments.
Limited Liability Company (LLC)
The most common legal entity small businesses operate under is a Limited Liability Company, a.k.a. an LLC. Operating under an LLC is usually the best legal business entity your business can operate under, because it is easy to setup and it provides great liability protection to its owners.
To set up an LLC, you must file paperwork with your state and pay a filing fee. Before you file the paperwork, you need to have a few things figured out so you’ll be able to complete the paperwork. Some of the things you need before filing your LLC are the name, a registered agent, and how it is going to be managed. Once you’re approved through your state, the LLC does not give you any federal trademark rights. Trademarks are discussed further below.
Corporations
A corporation is typically not the best fit for a small business. Corporations have more fees and maintenance involved. However, if you plan on having investors, a corporation may be the best choice.
Contracts
I’m sure you have heard the term “get it in writing.” That is always a good rule of thumb in business. Contracts essentially define a relationship between parties. Contracts are important whether your business sells goods or services. With goods, contracts define price, delivery, the refund policy, shipping, when and how payment is due, and quantity. Issues can arise in any of those areas so it’s important to have them defined in writing.
Services contracts may need additional terms to help protect you. Service contracts can define what exact services will be provided. Some services are dependent on client response. Service contracts can allow you to terminate the contract if the client isn’t being responsive. Sometimes the result of a service can be subjective. Service contracts can protect you from a client saying, “I’m not satisfied with the service and I’m not paying.”
Why It’s Important to Have Terms and Conditions
If you run a website for your business, you’ll want to make sure you include terms and conditions. Terms and conditions are not required by law, but they’re are something you will want to include because it’s the contract between you and the visitors of your site. Terms and conditions can protect you if someone uses your website to make defamatory comments or infringe on someone else's intellectual property rights. Those are things you are not going to want your business to be liable for. There are lots of sample terms and conditions on the internet, however, it is best to have a licensed attorney draft terms and conditions for your website to fit the specific needs of your business.
Why It’s Important to Have a Privacy Policy
If you collect any kind of personal information from your customers/clients then you will need to have a privacy policy in place. Personal information includes names, addresses, mobile telephone numbers, email addresses, and so forth. A lot of states have privacy laws that require you to disclose what personal information you store and how you use it. There can be big penalties for not complying with privacy laws. Like terms and conditions, there are lots of sample privacy policies on the internet, however, it is best to have a licensed attorney draft a policy that fits your business.
Intellectual Property
There are three types of intellectual property: trademarks, copyrights, and patents. It’s important to understand the difference between these because they protect different aspects of your business. And whether you know it or not, many times intellectual property is the most value part of your business.
Trademarks
A trademark is a word, symbol, or combination thereof that is intended to identify and distinguish one merchant from another. Essentially, trademarks allow consumers to distinguish who is offering what goods or services. You can apply for a federal trademark registration for goods or services that let consumers know your goods and services come from you, such as your business name, logo, slogan, podcast name, service name, product name, and many more.
In order to obtain federal protection, meaning you are the only one that can use that term or logo throughout the United States, you must apply with the United States Patent and Trademark Office. The trademark application process takes at least six months, and the average amount of time is nine months. Filing a trademark application can be difficult, so it’s best to work with a licensed trademark attorney when filing.
Copyrights
Put simply, copyrights protect original works of authorship (content): podcast episodes, photos, videos, this blog post, books, songs, movies, and many more. The purpose of copyrights is to award creators for their creations by protecting the expressions of their ideas.
The neat thing about copyrights is that you don’t have to obtain a registration to have rights. Once you create a work, and it meets the qualifications, it’s automatically protected by copyright law. However, you can register your copyright with the United States Copyright Office, which does have its benefits. First, having a copyright registration allows you to sue someone for copyright infringement in federal court. Additionally, a registration allows you to recover attorney’s fees in a copyright infringement lawsuit. Meaning, if you win an infringement lawsuit, the other side will probably have to pay for the cost of legal fees.
Although we’re in the middle of a pandemic, there is going to be a large wave of new businesses. If you don’t take the time to protect your business now, you will end up spending 10-20x more money in the long run defending yourself. Do what you can now to protect yourself.
About the Expert: Andrea Sager is a small business attorney shaking up the legal industry with her Legalpreneur plan that provides all-access to her firm for small businesses. After working for a large law firm working with large businesses, Andrea realized her true passion was helping small businesses embrace and protect their business and intellectual property. In just under 2 years, Andrea has become the go-to attorney for entrepreneurs, protecting everything from their brand names to their courses and blog posts.
Tune in daily at 9 am, 12 pm, and 3 pm PST, for new installments of Ask an Expert.
Follow Create & Cultivate on Instagram, check out our Ask an Expert highlight reel for the schedule, and hit the countdown to get a reminder so you don’t miss out. See you there!
10 Glaring Contract Red Flags You're Not Paying Attention To
A lawyer breaks it down.
Photo: Smith House Photography
Unless you’re a lawyer, navigating a contract is a veritable minefield. Reading the fine print can be daunting, to say the least, especially for content creators who are hustling for every dollar. That’s why we tapped Christopher Dischino, a lawyer who specializes in business law, intellectual property, and corporate transactions, to break down some of the most common mistakes for us.
“Drafting contracts for freelancers often requires a delicate balance of terms, which both protect you and your intellectual property but are not overly onerous to your client,” Dischino tells Create & Cultivate. “When we discuss creating standard form contracts for many of our freelance clients, we discuss not only how they operate but who they are doing business with.”
While it’s important to note that everyone’s particular business operations are unique, below are ten of the most important items Dischino takes into consideration when drafting contracts for freelancers.
Business or Personal
“In order to insulate yourself from personal liability, consider forming a small business corporation or limited liability company and signing all contracts in your company’s name as opposed to individually. Operating through a company may have tax benefits, asset protection benefits, and adds a flair of professionalism to your business.”
Work for Hire
“If you are being hired to create a project or product, it is important to understand who owns it upon completion. Specifically, you should discuss with your client the extent of ownership by both parties upon completion. The U.S. Copyright Act provides that, as an independent contractor, copyright to the work product you create belongs to the creator of the work, unless otherwise agreed in writing. While most clients will expect ownership to be transferred, pay particular attention to any references to “Work for Hire.” If your client expects to receive ownership of the work product, make sure that it is expressly conditioned on payment in full.”
Indemnification Clauses
“Liability is always a concern when completing a project or product for a client. Whenever you see an indemnification clause, read it carefully. Many agreements state that if the work product created infringes on the intellectual property rights of a third party, the party creating the work remains liable for any damages. Likewise, a freelancer should make sure they are indemnified by their client and held harmless if the client utilizes the work in a way, which creates liability due to their own negligence or willful misconduct.”
Choice of Law and Venue
“Almost all contracts will have a clause that establishes where legal proceedings take place, should a dispute arise, and the law that governs the dispute. Make sure that the contract is not governed by laws that you and your lawyer are unfamiliar with and doesn’t require you to show up to court in a faraway land, especially if the dispute is over non-payment.”
Payment Method and Schedule
“Payment terms are often the elephant in the room when negotiating a contract. All too often, individuals or companies neglect to set a payment and deliverable schedule which leads to controversies as time goes on. Moreover, always consider requesting an initial deposit to bill against. Many contracts now require clients to sign a credit card authorization.”
Force Majeure
“Force majeure, which means superior force in French, is often an important red flag to be attentive of when drafting a contract. A force majeure or “unavoidable circumstance” prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the event. For example, a freelance photographer who setups for a beach photoshoot only to find himself in middle of a hurricane, would benefit from a force majeure clause that excuses his non-performance of the contract due to a circumstance beyond his control.”
Expenses
“Who covers the expenses of creating a work and when will they be paid? It is important to differentiate between payment for your services or work and the added expenses that were necessary for the completion of a project or product. From the beginning, establish if hard costs are included within your fee (and if so, consider a larger upfront deposit) or if costs are up and above your fee (if this is the case, establish what costs must be approved or which are pre-approved). Finally, make sure to define if the expenses will be paid upfront or if you will be paying out-of-pocket and requesting reimbursement.”
Scope of Work
“When do you start and where do you finish? Often times, projects are taken on or products begin with no true direction or trajectory. This lack of organization and parameters may lead to situations where a client continues to request work beyond the scope of what was originally contemplated. It is important to set parameters regarding the project or product so that you comply with what is requested, but also so that you are properly compensated for your work. The more specific and objective the scope, the better.”
Revisions, Drafts and Changes
“Just as important as the scope of your work is the amount of times you will go back to the drawing board, make changes, edits and revisions. For the sake of compensation (and your sanity), it is important to agree upon the amount of changes a client is able to request prior to the start of your work and the rates (whether a flat fee or hourly) at which additional work is billed.”
Termination Clauses
“It is important to set out the exact reasons or basis for which your agreement can be terminated. Termination clauses should not only consist of the client’s basis to terminate you but also considerations for when you need to terminate your client. It’s especially important to make sure that your client cannot terminate you for any reason or no reason without compensating you in full for the work you completed.”
About the Expert: Christopher Dischino leads Dischino & Company, a Miami-based law firm that provides legal advice and strategic consulting for the modern business, the entrepreneur, the free-thinker and those looking for something outside the box. With a knack for the creative and an entrepreneurial attitude, Christopher specializes in business law, intellectual property, and corporate transactions, assisting private clients and corporate entities to establish and expand their businesses domestically and abroad.
DISCLAIMER: The materials contained in this article has been prepared for informational purposes only and are not intended to provide, and should not be relied on for, tax, legal or accounting advice.
This story was originally published on April 10, 2016, and has since been updated.
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Professional Opinion: The Business of Breaking Up a Partnership
Breaking up with a business partner can be one of the most painful breakups you'll ever go through—and it comes with a price tag. Here, survival tips from someone who's been there and lived to tell.
*Written anonymously to protect the NOT so innocent.
I remember sitting there, just highlighting, highlighting and highlighting, so many numbers, so many charges, so much money—just gone. When we started the company together, it was thrilling. We were young, ambitious, hungry and starting something with a potential magnitude we didn't know or could even fathom. That’s how a lot of companies start, as an idea, a collaboration. Then all the sudden, you're in it.
The co-founder, business-boss-gal-pals model is popular—see Gilt, Rent the Runway, Birchbox and Proactiv—and it makes sense why. Everyone loves a partner in crime, you can do double the work and have double the fun, and that feeling of not being alone is, well, a good one. Partnering up with a friend can work out amazingly. Or it can not.
Cut to a few years into your business, employees, money and tensions run high, and while you may think your roles are clear as can be, your word means nothing unless it's in writing. Breaking up with a business partner might just be the most painful breakup you can go through—because this one comes with a price tag.
My story is not unique, but when it happened to me it felt like the world was crashing in. It was hard to breathe, difficult to believe that someone I trusted, and even cared about, could be taking money from a company that we had built together from the ground up. My gut had been telling me for months that something wasn't right, but I assumed it was more a personal issue and that no matter what was going on between us, we were both equally invested in the business.
Wrong.
It eventually came to light that not only was my partner not managing our finances, but actually manipulating them. This included racking up unrelated business expenses, disregarding all things tax related, and straight up embezzling money. I was devastated, and what was worse, I had no idea what to do next. I felt ashamed and scared to talk about it—I thought it had to be a reflection on me and how I operated a business. It took me a few years and several conversations to get over it, and through it all, I realized that I wasn't alone. One business partner taking advantage of another happens, and it happens a lot. Partnerships split up and morph all the time and for all kinds of reasons. Being able to step back back and realize something isn't working is a part of being a mature business pro.
Trusting someone is not a flaw but a positive characteristic.
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The hardest—and yet ultimately most helpful—thing for me to accept was that it was NOT my fault. Trusting someone is not a flaw but a positive characteristic. It takes trust to build a business, and had I been skeptical and suspicious from day one, we would have never gotten off the ground. Moving on and away from a partner does not have to mean the end of your business, and often, it will actually turn out to be the beginning of something great.
I hope this never happens to you, but if it does, here are my tips for pulling through, and maybe even coming out on top.
Don’t over react.
When I found out, I wanted to freak out, confront and deal with it head on, but cooler heads prevailed. Take a deep breath, and assess all the details of the situation to 100% ensure you are in the right before initiating a confrontation.
Get your team in place.
I was lucky enough to have an incredible lawyer and forensic finance team that helped shape my case and bring to light things I would have overlooked. Beyond that, they were able to deal with the personal communication that I wasn't emotionally prepared to handle.
Handle clients and employees with care.
The business of breaking it to your employees and clients is extremely crucial. I personally called each client to explain that my partner and I were parting ways. I followed up with an email of how the transition would work and assured them we were ready to take on the challenge. When you do all of this, resist the urge to talk bad about your former partner and keep the details of why you're splitting to a minimum.
Tune out the 'I told you so.'
One of the hardest things was hearing from many friends, family, business contacts and clients who swore that “they saw this coming.” I acknowledged that they meant well, but just tuned it out. Beating myself up wasn't going to help me move forward, and I had to focus on what was right in front of me.
Revise and Renew.
As roles and responsibilities change in your partnership, update your operating agreement. Even when everything is smooth sailing, it is crucial to know who is in charge of what.
Move on and UP.
I was nervous about keeping the same business name and dealing with the "How is so and so?" questions, but it gets easier and YOU get better. When someone asks a question about the past, politely change the subject to something in the future that you're really excited about.
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