Legal Advice and Startups

Photo: Junction 2015 hackathon

It’s often the case, when someone starts a business, that they don’t have a lot of money. There are always a lot of things to buy, like equipment, and if the business has moved into rented premises then there is the cost of a new lease, which can be high. Among the many things on the to-do list may be to hire a lawyer to get a standard client agreement drawn up, or terms and conditions for product sales, or licensing IP, or a shareholders (or partnership) agreement, and so on. Then the startup owner(s) find out that legal advice can be expensive, and they decide to skip the legal advice or professionally drafted documents for the time being, and make do with downloaded documents (sometimes from a different country) or documents a friend has given them.

Everyone has a budget, and if you can’t afford a lawyer then that is your reality. But startup business owners who decide, for whatever reason, to skip obtaining legal advice should be careful. It is worth keeping the following things in mind, in this situation.

You Don’t Know What You Don’t Know

Legal documents are written in legible language, at least more legible than they used to be. This may give non-legally trained readers the idea that the documents are transparent and that the average person can understand the law easily. That may be true some of the time but in general there are hidden complexities in most legal documents. In Australia, where I live, it takes five years of training to be a lawyer, and most law graduates need at least 2 or 3 years working in a firm to get the hang of what they are doing. An experienced business person may have seen enough documents and have had enough meetings and discussions with lawyers to understand legal documents. An inexperienced startup business owner is very unlikely to be able to do that as well.

Template Documents Are Templates, Not Finished Products

The internet is flooded with template legal documents, some free, some fairly cheap compared to a lawyer-drafted document. But, like any template, these documents are skeletons. If the wrong details are inserted into the documents, they can become incorrect and maybe, in the case of a serious error, useless. Also, a document borrowed from another country may have crucial differences. For example, the signature clauses in many US templates are inadequate in the Australian context. this is a piece of information that falls into the “you don’t know what you don’t know” category.

Saving On Legal Fees May Be A False Economy

Let’s say a startup business owner decides they can’t afford a contract lawyer to prepare their Terms and Conditions. They knock up a set of T&Cs themselves, based on something they copied off a website. Then, a year later, they get into a dispute with a customer, and the T&Cs are vague about the situation. The dispute ends up with litigation lawyers who settle the dispute before it gets to court.The business owner ends up paying lawyer’s fees anyway. How much? Maybe 10 times what it would have cost to hire a contract lawyer in the first place.

Find A Way To Get Legal Advice

If a startup business owner can’t afford to hire a lawyer for a particular project then that business owner should find another, less expensive way to get correct legal advice. There are multiple sources of information available in the digital age. There are many books on legal themes written by lawyers for popular audiences.Some lawyers have newsletters and provide free information via their websites. Just because you can’t afford something doesn’t mean it isn’t important.

[The author is a business lawyer in Perth, Australia with Irving Law. This blog post is not intended as legal advice for any particular person. Photo credit: Hackers at Junction 2015 by Vmuru a public domain photograph published by Wikimedia Commons and used here under a CC BY-SA 4.0 licence.]




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