Starting a business without the help of an attorney is a mistake that many first-time business owners make. Without a startup lawyer, many businesses find themselves lost when it comes to legal issues. This translates into trouble that costs more than a new company can afford. If you're searching for a startup business attorney in Delaware, here are a few things to consider.
Why Hire a Startup Lawyer?
Startup lawyers help iron out the legal aspects when a startup finally puts their ideas in motion. Some of the topics that top startup attorneys deal with are:
- Deciding how to raise money for your company has many important legal aspects to consider. Before you take a blind offer, always consult a startup lawyer.
- Website and Customer Agreements
- You need to own every part of your business, including your website. However, you shouldn't infringe on copyrights or trademarks of other companies. Customer agreements need to be air tight so there's no gray area where confusion can develop.
- Corporate Formation or Incorporation
- Choosing the right ownership entity is vital. It impacts tax payments, liabilities, and investors. If you choose the wrong one, it could haunt you. Some startups fail to set up a corporation or limited liability corporation (LLC). Instead, they opt for a sole proprietorship or partnership. However, these structures don't protect the individuals against legal issues arising from the business. Instead of business and personal assets being separate, they're combined. This could leave the startup and the individual in financial ruin.
- Employee Issues
- Hiring employees isn't always straightforward in a startup. Because you have the potential to make big profits, employees want a piece of the action. You need a lawyer to draft employee contracts to cover basic employment concerns, as well as more complex issues like stock options and confidentiality requirements.
As a general rule, you want to hire a startup attorney that deals with your specific industry. This gives them insight into specific legal obstacles that may come to light during the early stages. As your company grows, you may need new lawyers along the way.
Startup lawyers also deal with:
- To comply with tax laws and legal requirements
- Third Parties and the Public
- To help control risk with suppliers, customers, etc.
- To sort out the legal rights of each founder of the company. This has become an issue in many of the biggest companies of the 21st century including Snapchat and Facebook. Discussing options in an open forum promotes trust between founders and lawyers can help facilitate that.
In Delaware, hiring an attorney who knows the state-specific startup and incorporation law is important. Delaware has some of the most flexible incorporation laws in the country. Over 1 million companies are incorporated in the state, including 50 percent of publicly traded companies and 65 percent of Fortune 500 companies. Because of the favorable terms, starting a business in Delaware is beneficial if you have the right attorney to help you along the way.
If you're on a budget, make sure to cover these aspects:
- Establish a business entity
- Establish equity rights of the company
- Preserve all intellectual property
- Pay attention to tax liability
The tax liability aspect is another reason it's important to have a Delaware attorney. Delaware has specific business tax laws. It's a tax haven, which is beneficial for most businesses. Even if you're incorporated in the state, you may not have to pay taxes if you don't do business there. This is an area where a startup lawyer is handy.
How to Find the Best Startup Lawyer
Finding the best startup lawyer in Delaware requires consideration. Both large and small firms have pros and cons.
- Large Firm Advantages:
- Specific knowledge for each need all in one place
- Regional, local, and national clout
- Letters penned from the desk of large firms have more clout than those from a solo practitioner or recent graduate of the bar.
- Big names help you make connections for financing or incorporation.
- Small Firm Advantages:
- Lower rates for services
- Personalized, one-on-one attention
If you have no idea where to start, referrals are a great way to go. Ask people you trust to prevent finding a mediocre lawyer.
Startups should also cover everything without cutting corners. Three hurdles that startups face are:
- Legal costs are hard to gauge. They can be high, low, or somewhere in between. However, startups should never cut legal costs. If they must avoid expenses, it should be elsewhere.
- Fitting Your Needs
- A cheap lawyer that fills out paperwork on time isn't a bad asset. It keeps you out of legal trouble. However, one that provides more is worth the cost. They do the basic job of an attorney, yet they offer advice on other issues. They may see legal issues ahead or other looming problems, so they can keep you informed and on the good side of the law.
- Many startups don't know the processes, potential problems, or other aspects of starting a business. This makes it difficult for them to know how to find a good lawyer. Startups often pay more or hire a poor lawyer because of the lack of awareness on the issues.
Questions for Startup Lawyer
- What is your experience as a startup lawyer?
Before discussing any details, you should first ask about the lawyer's experience. This not only includes their time as a lawyer but also their experience in Delaware and in startup law. You should also ask specifics about each particular aspect of your startup.
- Do you have any other clients in the same industry?
Ideally, your choice of attorney should have experience in your industry. If they don't already have a strong connection to your field, they should commit to learning everything about it. Take note if they have clients that are your competitors. While there is a code of legal ethics lawyers must uphold, you don't want any temptation or your secrets leaking out to other companies.
- What are your connections?
Not every lawyer knows everything about every law subject. They have specific areas of expertise, but you may need more instruction or guidance. Asking about connections helps you find other lawyers you may need along the way. It may even branch out beyond legal issues to tackle other problems or concerns you may have.
- Do you know startup costs for businesses in Delaware?
Before you pick a lawyer, educate yourself so you can question potential attorneys knowledgeably. Ask how much it costs to incorporate in Delaware. If they don't know it's about $1,000 in filing fees and $350 a year for Delaware's franchise tax, keep searching.
- What are your billing rates?
Larger firms charge higher rates. Smaller firms charge less. This is due to reputation, connections, and level of experience. It's not that larger firms are always better. However, they may offer several services in one place. The high number of lawyers in Delaware do make it easy to negotiate rates. Many lawyers have flat rates for basic services, but you may have to ask. More complex legal situations usually come with hourly rates. This includes litigation and third-party negotiations. Other billing considerations include:
- Per Diem rates
- Monthly retainer
- Contingency rates
- Value added rates for favorable results
- Are you the best in Delaware?
This may seem like an absurd question, but it's perfect for an interview. It puts a lawyer on the spot and helps you gauge their value. Even if they aren't the best in Delaware, their answer may make them the right fit for your startup.
- Are you a full-service law firm?
If you go with a larger firm, you need to know what they'll tackle. Some firms are full-service, while others only do specific tasks. Full-service law firms have people to cover incorporation, trademark, and tax law. However, they also have people to handle litigation, immigration, or employee benefits. Even if you don't need some of these services at first, it's best to have it covered for later. Without it, you may have to pick someone at the last second. This often leads to problems, high costs, or lack of expertise.
- Can I contact your references?
Just because a lawyer has worked with other startups doesn't make them the best choice. To get a better idea of how they work, ask to contact their former or current clients. Talking to these businesses will give you expectations, realizations, and other important information.
Questions to Ask Yourself
Before hiring a startup attorney, you may have to ask yourself some questions:
- Does my lawyer give good advice?
- You don't want a lawyer that just gives yes-no answers. Look for a lawyer that gives several options to meet your needs. The more they outline your options, the better they are.
- Are they convenient?
- Always try to find a convenient lawyer. This is one that's always up to meet you. They should also have offices close to you. This prevents you from spending an entire day on travel for a meeting.
- How do I choose?
- When in doubt, go with your gut instinct. Trust and communication outweigh all other aspects. This helps form a better relationship personally and in the business.
Tasks For Top Startup Lawyers
While startup attorneys have broader tasks, you need one that's familiar with specific subjects such as:
- Contract Law
- The ideal lawyer can draft contracts regarding your website, as well as customer and supplier contracts. They can also analyze contracts that others will ask you to sign.
- Real Estate
- Commercial real estate contracts are standard. This means that startups sign without reviewing the contract. A good startup attorney can review a commercial real estate contract and draft an addendum. This adds provisions that help protect your rights as a tenant.
- Intellectual Property
- If your company deals with creative products or ideas, you need to protect your intellectual property. Lawyers that are well-versed in trademark and copyright laws can help you file patents, trademarks, and other legal documents. This helps you keep legal status of your inventions. If your lawyer doesn't do intellectual property, hopefully they have a connection to someone who does.
- Licensing and Taxes
- Getting the proper licenses are important for you to do business legally. A good startup lawyer will complete all the paperwork so you aren't missing a vital license required by the state of Delaware. This attorney will also help you register your federal and Delaware tax ID numbers. In addition, they can help identify tax laws, and how they'll affect your business.
- Business Organization
- A startup lawyer can help you weigh incorporation options. This means you won't be alone when deciding whether to set up an LLC, corporation, or partnership.
In many instances, you will need several lawyers to tackle these tasks. However, the more subjects a single lawyer knows, the better and more convenient for you.
On UpCounsel, you can find and connect with several top-rated Delaware startup attorneys & lawyers that provide a wide range of startup law services specifically for startups and entrepreneurs that are starting a business in the state of Delaware or may wish to incorporate elsewhere. Any of the affordable startup lawyers you connect with are vetted, rated, reviewed, and will be available to help with a variety of your startup law related legal needs on-demand or on an ongoing basis.
Typically dealing with startup legal needs like business formation, contracts, leases, equity financing, securities, and intellectual property protection, the Delaware startup lawyers on UpCounsel can help you with a variety of specialized and general startup law related legal matters. No matter what type of startup law needs you have, you can easily save money and hire an experienced startup lawyer servicing the state of Delaware to help you today.
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