Startup Law · Contract negotiation

Start-up / Small Biz Legal help needed - Does Retainer or Adhoc work best?

Brandies Dunagan CEO & Co-Founder of SourceDigital Marketing

June 17th, 2015

We are a start-up in Chicago getting ready to spin out of our incubator as an LLC. We are trying to figure out at this stage:

1 - Who would you recommend for legal councel for businesses such as mine?
2 - What structure would you enter into? A retainer or as needed.

Thanks!
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Rob G

June 17th, 2015

in general i prefer pay as you go - tying up your capital merely to have it sit in someone else's bank account is not efficient use of limited capital.  If the attorney/firm is not responsive find another - there is no shortage of good legal help. 

Lane Campbell Lifelong Entrepreneur

June 17th, 2015

Hi Brandies!

I'm also in Chicago and I love working with sentientlaw.com - the founding partner Matt Rossetti / Matt(at)sentientlaw(dot com) only works with startups and they are local to the Windy City so they can meet in person. Brilliant legal mind aside Matt is very easy to work with.

They are very affordable, I can't advise how to pay them because I don't know what spinning out into an LLC will entail.

Regards,
Lane



Merritt Baer

June 17th, 2015

Hi Brandies, 

I run a shop, coVenturr, where we house legal counsel as well as business strategy, marketing and social media, and full suite business counseling. I encourage you to check us out and I'd be glad to talk through options with you. In terms of fee structure, usually I offer the client either a flat rate or an hourly billable to be withdrawn from a retainer. Advantage of flat rate is that you can use as much counsel as you need, advantage of the retainer is less cash up front. You might consider including some equity as part of your compensation, as many start up lawyers (including us) tend to invest in our clients literally.

Feel free to reach out directly. Mbaer [at] coventurr.com. good luck! 

Lisa Emery Founder and President of Expressively Gourmet

June 17th, 2015

I work with legalshield.com. For a small monthly fee they cover / support a wide range of issues. Sometimes it is as simple as words of wisdom to keep going forward in a wiser manner.

Merritt Baer

June 17th, 2015

Hi Brandies,

I run a shop, coVenturr, where we house legal counsel as well as business strategy, marketing and social media, and full suite business counseling. I encourage you to check us out and I'd be glad to talk through options with you. In terms of fee structure, usually I offer the client either a flat rate or an hourly billable to be withdrawn from a retainer. Advantage of flat rate is that you can use as much counsel as you need, advantage of the retainer is less cash up front. You might consider including some equity as part of your compensation, as many start up lawyers (including us) tend to invest in our clients literally.

Feel free to reach out directly. Mbaer [at] coventurr.com. good luck!

Steve Everhard All Things Startup

June 17th, 2015

Unless you foresee an impending legal issue or you want access to a specific lawyer I would not enter into a retainer. In all probability your demands will be sporadic and may even require you to shop around for skills. Tying yourself to a firm may not be your best strategy but only you can determine that.

The major problem with retainers is that you have to manage them. You need to know hours billed and whether there is any carry over of unused hours to the following month. In all likelihood there won't be.

As an LLC the lawyers will effectively be acting for the partners as you don't have a distinct corporate entity from a legal standpoint but a partnership with certain limited liability coverage. You will have no liability for federal corporate income tax but you'll also find it incredibly hard to fund raise and banking arrangements reflect the partners rather than the business position. You also won't get the tax advantages of issuing dividends.

Elizabeth Koshy Board Advisor at Stealth Mode Startup Company

June 17th, 2015

Brandies You should take someone on retainer ship I have a good lawyer who is very reasonable but he is based out of Silicon Valley Elizabeth Sent from my iPhone

Brian Gannon Owner at Gannon Law, LLC

June 17th, 2015

Hi Brandies,

I have my own law firm and I work with many companies similar in size to yours. I have the flexibility to enter into either type of arrangement with my clients depending upon their actual needs. I would be happy to discuss with you at your convenience.

Regards,

Brian

Elizabeth Koshy Board Advisor at Stealth Mode Startup Company

June 17th, 2015

Brian Please send me your coordinates Best Elizabeth Sent from my iPhone

Scott Milburn Entrepreneurial Senior Executive and Attorney

June 17th, 2015

Hi Brandeis, I am both an attorney who provides legal services for small businesses, as well as a business consultant who provides part-time management for small technology companies (COO, biz dev, sales, etc.), so I am familiar with both sides of the equation.

As far as an attorney, look for someone who knows small businesses, and especially the technology industry. I would not pay a retainer, which is a fixed fee for up to x hours per month, because as someone else suggested, chances are you won't need a lot of legal work in the beginning. What you will likely pay, however, is an advance on fees. So, e.g., you might pay $2,500 up front, which will be held in trust and applied to your invoices as incurred. If there is a balance left at the end of the engagement it would be refunded to you.

You should also be able to get an LLC formed for a fixed fee - e.g. I do a single-member LLC for a flat $850 and multi-member for $1,500.

Regarding the corporate form, an LLC is a great choice in the beginning. It is easier to form and easier to manage than a corporation, and it still gives you the protection from personal liability. If the day comes when you are taking on investors and need to be able to issue stock, it is quite easy to convert the LLC to a corporation.