Do I need a startup lawyer?

As a startup founder, you aren’t obliged to hire a lawyer. But running a company, hiring people, and selling products or services come with plenty of rules and regulations so sometimes you might need to bring in specialist help.

The good news for thrifty startups is that technology is dramatically changing legal services. Many tasks for which you previously needed a lawyer are now possible with affordable, do-it-yourself online services. And with AI accelerating change in technology, more legal work is being automated, improving efficiency and cutting costs.

In this post, we set out the pros and cons of hiring a startup lawyer to help you decide what’s right for your company, alternatives to hiring a traditional lawyer or law firm, and we list the tasks for which you don’t need a lawyer.

Contents

• Advantages of hiring a specialist startup lawyer
• Disadvantages of hiring a specialist startup lawyer
• Alternatives to hiring a startup lawyer
• When you don’t need to hire a startup lawyer
• When you will need to hire a startup lawyer
• How to decide whether to hire a startup lawyer

Advantages of hiring a specialist startup lawyer

Bring in legal expertise
A lawyer specialising in startups can give you tailored advice on various legal aspects of running your business such as intellectual property, contracts and regulatory compliance. Rather than having to develop your own legal knowledge, the lawyer brings this expertise, giving you more time and energy to devote to growing your business.

Mitigate risks
A startup lawyer can help you identify potential risks and propose strategies to help you and your company minimise liabilities. For example, the lawyer’s expertise in drafting contracts and agreements could protect your company against potential disputes.

Gain access to a useful network
Experienced startup lawyers often have a network of contacts in the industry so they can offer you more than just legal advice. For example, they could connect you to potential investors, mentors or advisors to help you grow the company.

Disadvantages of hiring a specialist startup lawyer

Increases costs
Lawyers are notoriously expensive and for some startups, legal fees can become a significant cost. To hire a lawyer, you might need to cut spending in other areas, which could inhibit the growth of your business.

Causes delays
If you engage a startup lawyer, this could cause delays for your company while you wait for the lawyer to complete tasks. For example, many lawyers still draft contracts manually – they don’t yet automate or use AI to speed up routine jobs. Doing things the old-fashioned way could slow down the pace at which you and your company normally operate.

Hinder your learning
If you hire a specialist lawyer, you might end up relying on their knowledge rather than developing your own. For new entrepreneurs, gaining legal know-how is an important aspect of the journey to becoming a successful founder. You’ll need to find the balance between seeking expert legal counsel and actively learning about the legal intricacies relevant to your business.

Alternatives to hiring a startup lawyer

There’s good news for startups who need cost-effective legal solutions. Online legaltech platforms such as SeedLegals are an appropriate alternative for many startups. Legaltech (or ‘lawtech’) services streamline legal processes using automation, integrations and/or AI.

Here are some of the advantages of using an online legaltech platform:

Cut your costs
Legaltech platforms are usually more affordable than hiring a specialist lawyer because you pay for the online services as a subscription or pay-as-you-go.

Speed up your legal admin
Legaltech services automate legal processes to save you time. This is particularly efficient for common business legal tasks such as drafting contracts, creating equity agreements (share option schemes), managing your board and doing SEIS compliance.

Access documents anytime
With a do-it-yourself legaltech service, you can store legal documents securely online and access them whenever you need to, wherever you are.

Customise legal docs
Legaltech platforms make it easy for you to customise documents, choosing appropriate terms to fit your situation. To create a legal document on SeedLegals, you step through a series of straightforward questions and then your document is generated automatically.

When you don’t need to hire a startup lawyer

For many straightforward legal tasks, you don’t need to consult a lawyer unless your circumstances are unusual. Here are some tasks you can easily do without hiring a specialist lawyer:

• Incorporate a limited company
  It’s easy to register a limited company in the UK via the Companies House website and it costs just £12 (at the time of writing). Or you can incorporate for free with SeedLegals and Tide, the finance platform for small businesses: register your company
• Hire someone
  Need to hire an employee, consultant, freelancer or intern? On SeedLegals, you can quickly generate a customised contract, send it to your new hire to sign online, and store the document securely: create contracts
• Appoint an advisor
  Similar to hiring an employee, you’ll need to sign a contract with the advisor to set out how the relationship will work and how you’ll reward them. Here’s how to do it on SeedLegals: appoint advisor
• Appoint a Non-Exec Director
  Create the Letter of Appointment and then inform Companies House about the new appointment. (You also need to inform Companies House if you remove a director.) Here’s how to do this on SeedLegals: appoint NED
• Get a business loan
  Unlike getting a mortgage where you need a solicitor, to get a business loan you don’t need a lawyer. Your accountant and the lender should explain everything to you before you sign for the loan.

• Set up an option scheme and give share options
  To attract and retain employees, startups often create a share option scheme. This used to involve having a lawyer set up the scheme and create the option grant documents. Now, you can use a service such as SeedLegals to create and manage the scheme yourself: set up and run an option scheme
• Take an investment and/or do a funding round
  Whether you’re taking a one-off investment or doing a full funding round, it’s now much easier to do the legal side of the fundraising yourself with the help of a legaltech platform. For more complex deals, you might need to bring in expertise with a legal advisory service.

When you will need to hire a startup lawyer

While online legaltech platforms can handle routine legal tasks efficiently, sometimes you’ll run into a complex matter which might need the expertise of a specialist lawyer. For example, if you can’t resolve a dispute, if you’re being sued, or if you’re negotiating with an investor who has a particularly complex set of requests.

How to decide whether to hire a startup lawyer

Whether you decide to hire a specialist lawyer depends on the tasks you need to do, the stage of your company, and what you can afford. Some startups find a hybrid approach works well, for example you could use an online legal platform for routine legal admin, and consult a startup lawyer for more complex tasks.