

The biggest legal mistakes startups make - duck
http://entrepreneur.venturebeat.com/2010/05/24/the-six-biggest-legal-mistakes-startups-make/

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tptacek
Here's 'grellas take on the same subject, which I think crushes this article:

<http://www.grellas.com/faq_business_startup_005.html>

In particular, the points he makes about "VC firms will want you to do X, so
do X from day 1" seem to be flat-out wrong; setting up a complicated C corp
and equity structure is more painful than just creating a simple temporary
structure, because the lawyers are just going to re-do everything when you get
funded anyways.

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anigbrowl
Indeed - and any mistakes which need to be rectified later will come out of
the founders' cut. This is easy to miss amid the excitement of getting
properly funded, but can become expensive later.

In the film industry (where I work), indie firms are thrilled to get a
distribution deal, but many fail to realize the importance of legal and
technical diligence early on and are later surprised to find find anticipated
revenue drastically reduced by various compliance issues - for example, a
producer might get releases from their main actors but not have all
appropriate paperwork in place for professional contributors, or the acting
releases may be legally inadequate. The distributor will cheerfully supply all
the necessary paperwork to cover their potential liability, but then subtract
the cost of its preparation before royalties are paid. What seems like 'mere
overhead' at the deal-signing stage can turn to be extremely expensive later,
and few people want to share the details of such mistakes in public.

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bradleyland
Here's another one for the small-ish entrepreneurial set, because not everyone
is going to be able to attract big VC funding.

Don't mix your businesses. As a busy entrepreneur, it's tempting to do work
from a "past life" and bill it through your shiny new company. Don't do it.
Just don't. One of my companies is currently involved in a lawsuit because of
an agreement that one of my partners signed, of which I had no knowledge.

You take on enough risk in the normal course of business while focusing on
your core business. If something is worth doing, it's worth having a company
dedicated to doing it. In large part, the function of a corporation is to
compartmentalize your business and isolate risk. Take advantage of that fact
wherever possible. Having learned our lesson, we've even gone a step further
and isolated our core IP holding corporation from our operating/sales
companies.

"If I knew then what I know now" I wouldn't be in this mess.

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blueben
A law firm recommending that you do things that require a law firm's help, and
scaring you away from cheaper competition in Legal Zoom. Color me surprised.

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rlpb
I've always been a bit sceptical about this. There seems to be a general idea
that only lawyers are qualified to have any input whatsoever into legal
situations.

This may be technically true, but I'm also sure that there are plenty of bad
and/or indifferent lawyers out there. There must be non-lawyers who will be
able to do a better job themselves. In particular, I think that hackers have a
good chance at this.

That is, it is implied that:

[all lawyers] > [everyone else]

whereas I think that:

[good lawyers] > [some intelligent non-lawyers] > [bad/average lawyers] >
[everyone else]

This can apply in particular if you are prepared to research a particular
topic for hours on something that a lawyer would speak to you for ten minutes
and then copy and paste boilerplate for. You will likely find the same
boilerplate and research all the options more thoroughly yourself.

I am by no means saying that lawyers shouldn't be consulted. I use one for
stuff that is very important for me, since I cannot risk getting it wrong. But
I also do my own research, and this has helped me ask the right questions and
get the right result.

I'm just saying that hiring a lawyer is no silver bullet.

