HN Explorer

Ask HN: Incorporating a business and initial legal work: go solo or use a lawyer?

2 points by andale ↗ HN
I'm currently at the brink of starting a business, and thus am looking to form an LLC (open to the idea of a C-Corp as well though) in DE, as well as drafting our first Master Service Agreements and employee contracts.

The way I see it, I have two options: use a law firm that will charge me <$3000 to set up all these initial legal documents, or try and save some of that money and use rocketlawyer/legalzoom and do so myself.

Does anyone have experience/input around this?

Many thanks in advance!

8 comments

[ 3.1 ms ] story [ 28.8 ms ] thread
patio11
LegalZoom is perfectly adequate for incorporating, particularly if you're doing it solo and don't need to worry about e.g. equity or vesting between multiple partners.

With regards to getting an MSA drafted: many consultants just use one from NoLo or similar. Your larger clients who most care about the details will simply refuse to use yours and counterpropose using their standard paper. You will say that you'll accept their standard paper pending legal review and pay a lawyer a few hundred bucks per incident. Your lawyer will, ideally, prevent you from agreeing to any term that "gives away the store", like e.g. an IP assignment or non-compete which would prevent you from ever doing anything in a related field again.

andale
Thanks for the input. FWIW, we are looking to form a multimember LLC. I've read over several operating agreements and we're both on the same page as far as that goes, not sure if that might alter your feedback.
tptacek
Do talk to a lawyer before forming a multi-member LLC. If there's any chance that any subset of the members of that LLC will go on to develop something bigger, you need to work out vesting and control.
andale
Many thanks for the input. Right now the only members of the LLC are my cofounder and myself. We intend to keep it that way (and dole out shares to investors and employees down the road). As for vesting, he and I are on identical schedules.
tptacek
Don't waste time getting a master services agreement reviewed by a lawyer, because big clients are never going to let you use your own master anyways.

Do talk to a lawyer before incorporating with multiple cofounders, because you need vesting. Do not mess that up. It is a big deal.

Don't waste too much money on company formation, though. Try to keep the transaction with the lawyer focused solely on vesting. There are lots of other things you can do suboptimally during company formation, but they aren't going to matter so much that you should spend extra money today to deal with them.

Do talk to a lawyer before signing your first employment agreement, but don't do it until you actually need to do that.

andale
Again, thanks for the insights.

"Don't waste too much money on company formation, though. Try to keep the transaction with the lawyer focused solely on vesting. There are lots of other things you can do suboptimally during company formation, but they aren't going to matter so much that you should spend extra money today to deal with them."

Could you expand a bit on this? When you say "Try to keep the transaction with the lawyer focused solely on vesting" do you mean basically making sure that all stipulations around vesting are ironclad and super straightforward?

tptacek
Yes; don't, on the other hand, waste lots of time on multiple classes of stock, or on discussing the benefit of S versus LLC or C versus S; you can end up paying thousands of dollars for what should cost you a couple hundred tops.
dctoedt
I posted some notes and links to suggested reading in this area, adapted from a talk I've given several times for Houston start-up forums [fora? fori?], at http://www.OnContracts.com/legally-lean. As it happens, in different places the notes cite both @patio11's and @tptacek's comments here at HN.