I'm cringing in anticipation of the downvoting, but I can't help myself here: this is TERRIBLE advice. Absolutely egregiously awful.
The consultation of a good (that qualifier is important) attorney is worth every single penny. He/she will save you from making terrible mistakes like adopting the wrong corporate form, creating contracts that don't protect you and expose you to liability, signing off on contracts that you shouldn't...I could go on and on.
$9,000 is a paltry sum relative to the risk that was averted by having a professional get things done right. Yes, by all means, read up on the sites linked in the OP and exercise due diligence in understanding what you're getting yourself into, but find other places to cut your budget. Don't skimp on having good legal and good accounting. These people pay for themselves many times over.
Furthermore, if the OP spent this money prior to having code written, the bad decision was in the order the money was spent, not in the way it was spent.
On a side note, and this is really what I'm expecting the downvotes for: I question the judgement of anyone who finances their operation with credit card debt, especially a relatively small sum like $12K. If you can't save that money over time by getting slim with your personal budget, you are probably in for a world of hurt caused by an upside down balance sheet. Debt is not your friend, despite what "sophisticated" people tell you.
In the US, how is "adopting the wrong corporate form" a terrible mistake? Your realistic choices are LLC, S, and C corporation, and the only thing you're likely to do wrong here is spend the extra time, money, and heartache setting up a C.
You should engage a lawyer for transactional work like contract review, of course. But I don't read this article as an argument for not having contracts reviewed. Rather, it's an argument for keeping your legal overhead transactional, rather than integrating a lawyer into the early planning stages of your business.
Aren't you assuming that the average lawyer will, in fact, give better advice than can be gleaned through self-research? It's not inconceivable that for a number of routine things, the average advice is not likely to be any better (and possibly worse) than you'd get by reading a standard introductory text on the subject, and using one of the standard boilerplate contracts, after having read and understood standard advice written by a respected authority in the area, on what they each do and how to choose between them. This is particularly the case because the average lawyer is not grellas. =]
(As the other branch of this thread discusses, I agree that contract review is a different matter; in that case, you want someone who's familiar enough at pattern-matching to spot unusual things or possible pitfalls. But reviewing contracts proposed by other people is one specific kind of lawyer-consultation.)
I think the point of the article is "In order to use your financial and legal counsel less, you're going to have to self-educate."
Note that the author says to use professional services less, but does not say to completely eliminate them. The more you can learn yourself, the less "research" your lawyer has to do, saving you money.
Perhaps I'm missing something (I've never lived in lawsuit happy US), but I've relied on basic human decency all my life and it has turned out fine for me.
I think there is a time for lawyers, but it's not when you are building your first prototype. You just can't afford to throw money at problems that don't exist yet.
I'm always amazed by the number of new entrepreneurs who have no understanding of the legal risks when they start their company, especially with co-founders. You need an enforceable agreement in place, and yes, it should not cost $9,000.
Those who know me know that I started offering an equivalent online agreement (the fancy term is "virtual incorporation"), which you can check out at http://foundrs.com
I continue to recommend it to all new developers who can't go straight to a Delaware C Corp.
It is like saying that it is a waste of money to hire an electrician to rewire your house. There is enough free information on the internet.
Is there? Sure. But your lack of experience and knowledge on the topic could still lead you to electrocuting yourself. Similarly, so could hiring a bad electrician. But the safer bet is with the man whose trade is in working with electric and wiring.
And when financial liability, your livelihood, and matters of the law are on the line, the safer bet is with the man whose trade is in the law.
What about, say, car maintenance/repair? Plenty of hackerly types work on their own cars, despite the fact that a mistake could potentially be fatal, and there are professionals who specialize in the field.
Also, don't ever ask lawyers if there's any liability in your interface. I once had a lawyer loving client who wanted to create a social site, he consulted with his lawyer and he came back to us asking that every single piece of the interface where you could share information should have a disclaimer.
So under every comment box, every I like it button, every photo upload there's a "I hereby grant permission to share my opinion with this site. View privacy policy".
Don't waste your money on attorneys. Use it wisely. A good attorney is critical for anyone dealing with client contracts and it would be foolhardy for anyone to deal with major corporate clients with nothing but boilerplate contract. Especially if you're getting contracts to sign. (Along those lines get a good Errors And Omissions insurance policy)
Doing a startup? Talk to attorneys who specialize in this kind of thing. When I was just thinking about doing a startup I met with some folks at Orrick (big, big firm) who offered to do the first 10k in services for a small equity stake. An offer like this could have saved the authors ass. They also know everyone who means anything and are a great way to meet the right folks. If they introduce you to your first angel wouldn't it be worth it?
Agree. In business you will never have enough money or time to do everything right. There are risks in business and managing those risks is a skill that is learned over time. And decisions that need to be made are not digital they are analog in nature. They depend on many factors and different circumstances. Lawyers don't give business advice and everything they do is colored by the bias and fears they have.
In general lawyers are going to be CYA about everything like you mother and father.
Many successful business people and companies play loose and fast and, after making enough money, are able to dig themselves out of any mess they have made or risk they have taken (BP and Exxon are just two examples. And Apple). It all depends.
Obviously to avoid wasting your money you'd have to find a good lawyer. As many people have asked, how do you know a good lawyer from a bad lawyer?
Recommendations? That'll only work so far.
Price? Indirect indicator.
If I don't know much about the relevant law myself, then how would I know if he's any good? If I have to take the time to educate myself, then again I'll be doing his work.
This sort of legal stuff like setting up a company isn't exactly rocket science; it's a form of administration practiced against commonly known rules and the idea is not to deviate too much from what everyone else is doing to play safe. It's something that could, probably for 90% of cases, be done by some sort of a Create Company wizard tool that yields legally sensible outcomes. There are only so many legally relevant configurations of a new startup.
The best legal investment I ever made was $400 on Law 101 at Stanford. It doesn't turn you into a lawyer, but it teaches you to look at things from a legal perspective, and understand the risks involved with everything you do (seriously, even stepping out of your front door) and think about what you could do to reduce them.
To paraphrase our professor on criminal law, if you stop to think about it, it's actually impossible to get through the day without breaking the law.
The point to take away from the article is to budget some money for a lawyer to draft/consult on crucial documents, but do not use him for all minutiae.
Lawyers will usually adopt a better safe than sorry attitude. At a startup, this might not be exactly what you want.
Second, great laywers are just like great programmers, not that easy to find and qualify.
'Use your lawyer efficiently to avoid wasting money' would be a better fitting title.
The comments that have been posted so far lead me to believe no one actually read the full post. He's not trying to tell people lawyers are all a waste of money.
[+] [-] crikli|15 years ago|reply
The consultation of a good (that qualifier is important) attorney is worth every single penny. He/she will save you from making terrible mistakes like adopting the wrong corporate form, creating contracts that don't protect you and expose you to liability, signing off on contracts that you shouldn't...I could go on and on.
$9,000 is a paltry sum relative to the risk that was averted by having a professional get things done right. Yes, by all means, read up on the sites linked in the OP and exercise due diligence in understanding what you're getting yourself into, but find other places to cut your budget. Don't skimp on having good legal and good accounting. These people pay for themselves many times over.
Furthermore, if the OP spent this money prior to having code written, the bad decision was in the order the money was spent, not in the way it was spent.
On a side note, and this is really what I'm expecting the downvotes for: I question the judgement of anyone who finances their operation with credit card debt, especially a relatively small sum like $12K. If you can't save that money over time by getting slim with your personal budget, you are probably in for a world of hurt caused by an upside down balance sheet. Debt is not your friend, despite what "sophisticated" people tell you.
[+] [-] tptacek|15 years ago|reply
You should engage a lawyer for transactional work like contract review, of course. But I don't read this article as an argument for not having contracts reviewed. Rather, it's an argument for keeping your legal overhead transactional, rather than integrating a lawyer into the early planning stages of your business.
I think your comment is a bit hyperbolic.
[+] [-] _delirium|15 years ago|reply
(As the other branch of this thread discusses, I agree that contract review is a different matter; in that case, you want someone who's familiar enough at pattern-matching to spot unusual things or possible pitfalls. But reviewing contracts proposed by other people is one specific kind of lawyer-consultation.)
[+] [-] rdin|15 years ago|reply
Note that the author says to use professional services less, but does not say to completely eliminate them. The more you can learn yourself, the less "research" your lawyer has to do, saving you money.
[+] [-] duopixel|15 years ago|reply
I think there is a time for lawyers, but it's not when you are building your first prototype. You just can't afford to throw money at problems that don't exist yet.
[+] [-] alain94040|15 years ago|reply
Those who know me know that I started offering an equivalent online agreement (the fancy term is "virtual incorporation"), which you can check out at http://foundrs.com
I continue to recommend it to all new developers who can't go straight to a Delaware C Corp.
[+] [-] bittermang|15 years ago|reply
Is there? Sure. But your lack of experience and knowledge on the topic could still lead you to electrocuting yourself. Similarly, so could hiring a bad electrician. But the safer bet is with the man whose trade is in working with electric and wiring.
And when financial liability, your livelihood, and matters of the law are on the line, the safer bet is with the man whose trade is in the law.
[+] [-] _delirium|15 years ago|reply
[+] [-] duopixel|15 years ago|reply
So under every comment box, every I like it button, every photo upload there's a "I hereby grant permission to share my opinion with this site. View privacy policy".
[+] [-] mikeryan|15 years ago|reply
Doing a startup? Talk to attorneys who specialize in this kind of thing. When I was just thinking about doing a startup I met with some folks at Orrick (big, big firm) who offered to do the first 10k in services for a small equity stake. An offer like this could have saved the authors ass. They also know everyone who means anything and are a great way to meet the right folks. If they introduce you to your first angel wouldn't it be worth it?
[+] [-] larrys|15 years ago|reply
http://en.wikipedia.org/wiki/Sosumi
Agree. In business you will never have enough money or time to do everything right. There are risks in business and managing those risks is a skill that is learned over time. And decisions that need to be made are not digital they are analog in nature. They depend on many factors and different circumstances. Lawyers don't give business advice and everything they do is colored by the bias and fears they have.
In general lawyers are going to be CYA about everything like you mother and father.
Many successful business people and companies play loose and fast and, after making enough money, are able to dig themselves out of any mess they have made or risk they have taken (BP and Exxon are just two examples. And Apple). It all depends.
[+] [-] yason|15 years ago|reply
Recommendations? That'll only work so far.
Price? Indirect indicator.
If I don't know much about the relevant law myself, then how would I know if he's any good? If I have to take the time to educate myself, then again I'll be doing his work.
This sort of legal stuff like setting up a company isn't exactly rocket science; it's a form of administration practiced against commonly known rules and the idea is not to deviate too much from what everyone else is doing to play safe. It's something that could, probably for 90% of cases, be done by some sort of a Create Company wizard tool that yields legally sensible outcomes. There are only so many legally relevant configurations of a new startup.
[+] [-] bluesmoon|15 years ago|reply
To paraphrase our professor on criminal law, if you stop to think about it, it's actually impossible to get through the day without breaking the law.
[+] [-] sireat|15 years ago|reply
Lawyers will usually adopt a better safe than sorry attitude. At a startup, this might not be exactly what you want.
Second, great laywers are just like great programmers, not that easy to find and qualify.
[+] [-] rkon|15 years ago|reply
The comments that have been posted so far lead me to believe no one actually read the full post. He's not trying to tell people lawyers are all a waste of money.
[+] [-] scott_s|15 years ago|reply