Hiring a lawyer is often confusing and daunting, especially if you've never done it before. But when you're starting a business, it's crucial.

Hiring and working with a lawyer is often confusing and daunting, especially if you’ve never done it before. But when you’re starting a business, it’s crucial. With the right expertise on your side, you can feel confident you’ve got your legal ducks in a row as you’re getting down to business.

WHAT SHOULD NEW ENTREPRENEURS LOOK FOR WHEN HIRING A LAWYER? First and foremost, look for “fit” (i.e., someone you trust, get along with, enjoy working with, feel has an interest in you and what you’re working on, and can relate to you). Referrals are often the best place to start. Just as important, you want someone that is competent, responsive, and experienced with the types of legal issues with which you will need help. The considerations that go into incorporating a restaurant, for example, can be very different from the considerations for incorporating a software company.

WHY DO START-UPS NEED A LAWYER? At the most basic level, start-ups need lawyers to help them deal with three groups:

(1) The government. You don’t want to violate laws. You also need to be sure you are doing business in a way that doesn’t create unnecessary tax liability and that you pay the taxes you owe.

(2) Third parties and the public. It’s essential to make sure you take reasonable steps to control risk in your interactions with customers, suppliers, users, employees, and the general public.

(3) Each other. When multiple people form a company together, it’s best to establish the rights and expectations of the founders upfront in case there are disagreements down the line.

The most likely times for start-ups to get lawyers involved include:

* Incorporation and forming a business entity

* Hiring employees

* Negotiating contracts with customers and suppliers, including establishing terms of service for websites and license agreements for software

* Raising capital

* Obtaining patents and registering trademarks (for some companies)

HOW DO LAWYERS BILL THEIR TIME? The lawyers most start-ups will deal with are likely in the $300-$500 per hour range, but this varies from law firm to law firm, obviously. Most law firms bill in increments of six minutes (i.e., 0.1 of an hour), but some charge in 0.25 hour increments. The range for hourly rates is huge. A junior associate attorney at a small firm in a smaller city may charge $150 an hour, while senior partners in big law firms in major cities have been known to charge over $1,000 an hour.

While the hourly rate is certainly a crucial part of the costs, you’ll also want to consider the mix of lawyers that will doing your work. Within a firm, the hourly rate for a senior lawyer can be three times more than the rate of a first-year lawyer (but for more complicated tasks, the senior lawyer may be able to do it in a third of the time). There isn’t one right answer as to the mix of senior and junior lawyers, but it is something to consider.

HOW MUCH WILL IT COST TO INCORPORATE YOUR NEW START-UP? If you work with a lawyer, you can probably expect to pay between $2,000 and $5,000. This can vary depending on complexity: how many founders, what “bells and whistles” will be included, whether you are doing an LLC or a corporation, and how you handle certain items, such as stock option plans, classes of stock, shareholder agreements, etc.

WHEN SHOULD YOU USE A LAWYER, AND WHEN IS IT OK TO USE ONLINE FORMS LIKE LEGALZOOM? The real value of a lawyer at the incorporation stage isn’t really in preparing the actual documents, but in helping you figure out what you need (LLC vs. corporation, what sort of vesting schedule makes sense, what to consider in preparing your shareholders' agreement, etc.). LegalZoom can be good if you know exactly what you need, but it can’t advise you on what is appropriate for your specific situation, and it won't advise you on the ramifications of your specific choices.

IF YOU'RE ON A BUDGET, WHICH LEGAL PRIORITIES SHOULD YOU FOCUS ON? Priorities that need to be addressed early on include:

* Establishing a business entity of some sort (LLC, partnership, limited partnership, or corporation) to protect you personally from business liabilities

* Establishing the ownership and equity rights of the company if there are multiple founders

* Ensuring the business’s intellectual property is protected and owned by the company (especially if it is being developed by independent contractors)

* Making sure you are paying attention to the tax consequences of what you do, particularly when it comes to granting people equity

If you're looking to start up a new business in the coming new year and need legal advice and representation, give us a call at 253.858.5434 to set up an appointment today. We've been representing small and medium-sized businesses and nonprofit organizations for 25 years and proudly represent clients throughout Washington and Idaho. We are available to meet in person, by phone, or via video conference.