As I prepared to start my new venture, I decided to interview five lawyers to find the right fit for me, mostly in terms of initial cost. Months later, I was talking to a lawyer who told me that new entrepreneurs should only take the time to interview two or three lawyers at most. Looking back, I would disagree and say that interviewing five was perfect for my fellow cofounders and me. The reason is that we had a unique situation among our cofounding team, and we did not find a suitable legal solution to our situation until we talked to the fifth lawyer. However, I would guess that for cofounding teams without any complexities, I would agree that interviewing two to three lawyers is plenty. I learned a LOT from the first two lawyers about best legal practices for startups, and then after talking to the third lawyer I wasn’t learning anything new. Wanting to know if I could find a different payment schedule for lawyer fees was another reason I interviewed five lawyers. Interestingly, I was presented five unique payment structures. If you’re preparing to talk to your first lawyer, I hope this will help you to understand some of the possibilities for payment arrangements you can expect (or ask for!).
Lawyer 1: $1,000 for corporate formation without vesting schedules. $1,500 additional in near term for employment contracts and stock option plans.
Lawyer 2: $5,000 for corporate formation with vesting schedules, with 1/2 of it deferred until we acquired funding.
Lawyer 3: Our startup did not qualifiy for their special “startup deferral program”. Regular fees would be charged at $600/hr.
Lawyer 4: $2,000-2,500 for corporate formation without custom legal clauses in any of the contracts.
Lawyer 5: Deferral of up to $10,000 in fees until we acquired funding or we cumulatively earned $250,000 in revenue.
I’d recommend that you ask every lawyer about the specific arrangement that best meets your needs, because each lawyer will be more or less willing to accommodate your needs depending on their current strategy for adjusting their portfolio of new venture clients.
You may want to make money only one consideration among a few others when choosing a lawyer for your startup. Here I simply wanted to talk about affordability issues.
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