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I am working on my first internet startup (in the US) and although I see a lot of advice and general steps to follow like how to pitch vcs etc, I want to know more about the legal aspects other than setting up a LLC/S corp/C corp. Would the same lawyer who incorporates set up Terms and conditions/ Privacy policy rules ? I am clueless because I have never worked with lawyers before. I am permanent US resident in CA. How much would I be expected to pay for such service and where do I find one? Thanks in advance!

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4 Answers

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I just went through this for a product I'm working on. I spoke to a lawyer here in Toronto, who said there were basically two things I needed: an IP waiver, to protect my intellectual property (a.k.a. my idea) and an NDA, to protect the sharing of information.

Basically, if someone works for you, you want to make sure that you still own the idea, and your employee can't take the idea and create it themselves. You also want to make sure they don't leave your company and take your clients, or your other employees, with them. That's what the IP waiver is for, and mine included a limited non-compete that protects for the latter issues.

You also want to be able to talk to people who may or may not work for you about your idea. An NDA is a document that says that the person signing it will not tell anyone else any information that they acquired from you, and isn't available to the public.

Besides those, once you have a product, you may need to file for a patent, or for copyrights. There are lawyers who specialize in that.

In looking for a lawyer, make sure that either they or their firm can provide a lawyer for all your needs. Going to a single lawyer will probably be problematic in the long run, as you won't be able to use the same lawyer for everything. (As an example, patent law is pretty specialized, and lawyers who focus on that tend not to do other forms of law.)

The documents I had drafted (IP Waiver + NDA) cost about an hour of work.

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up vote 2 down vote

First off, I am not a lawyer, I just work with a lot. At the risk of oversimplifying, for a "typical" web service startup, the major benefits of working with a lawyer at an early stage are:

  1. Limit liability: This involves advice and set up of the proper legal structure, set up of privacy policy, terms and conditions, and independent contractor agreements.

  2. Protect intellectual property (IF applicable): This involves setting up non-disclosure agreements and setting strategy for trademarks, patents, and trade secrets.

  3. Ensure legal compliance (especially with respect to employment law if applicable)

These are somewhat intertwined. Regarding your question about would the same laywer handle everything:

For terms and conditions and privacy policy, you want a contracts attorney who specializes in the internet space. This lawyer can likely handle the legal incorporation stuff too.

For intellectual property, you definitely want someone who specializes in the internet and software space.

Now here is where I'll probably get hate mail: While there are general practice legal firms (often larger) that cater to startups, and many will even defer fees, I disagree with Elie's advice to use a "one stop shop" firm. They are expensive and the quality of the work is heavily dependent on the associate (jr. lawyer) you get. How expensive? On the order of $10-15K for just the basics.

Better to work with a specialist attorney at a boutique firm. Rates are much better (can be 30-50% less than large firm) and you will generally work with an experience partner. Of course, finding the right one is the challenge.

Warning, Self-Serving Sales Pitch: My company works with startups like yours on just these issues. We also have a downloadable whitepaper that walks you through startup compliance issues.

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The place I go to is called Torkin Manes (torkinmanes.com) - they have lawyers on staff for pretty much all my needs, with the single exception of patents, for which they have a particular firm they'll send me to. The work I had done cost me less than $500, including the advice. – Elie Dec 2 '09 at 20:33
That seems about right for an NDA and IP Waiver, both of which are commodity items in legal. (There's a joke in Silicon Valley, that there is really only one NDA template that just keeps getting recycled and revised.) But I would be hesitant recommending to one of my clients anything but an internet contract specialist for crafting up a site terms of use or privacy policy. Especially in SaaS, the law appears to be evolving rapidly. Incidentally, how did you locate Torkin Manes and how would you go about evaluating the quality of their work? – edwinoh Dec 2 '09 at 21:07
One of their lawyers in particular was recommended by a friend. As the specifics of what I needed were not that complicated, I figured it couldn't hurt. The lawyer I dealt with was friendly, provided a good English explanation of the issues at hand, and was prompt in doing the work. For future work, I would ask his recommendation, as I know he does refer work to specialists. So if he doesn't know the details of some aspect of law, he'll pass me over to someone who does. He's already done that for the Patent law issues. – Elie Dec 3 '09 at 2:08
Thanks for the feedback. The reason I asked is that I'm always interested in knowing how people evaluate referrals as it has a direct bearing on our business value proposition. – edwinoh Dec 3 '09 at 17:09
up vote 0 down vote

There are plenty of lawyers - especially in CA and other states with large metropolitan areas - who can help you with entity formation and terms of service / privacy policy.

You may find the following helpful with respect to terms of service: Changing Online Terms of Use? Be Sure to Give Notice First!

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up vote 0 down vote

If you want to get some really good info at NO cost contact these folks.

http://www.laughlinusa.com/incorporating-intro.asp

They form entities and have registered agent services etc but what I really like is that you can call, get a human and just visit with them about what is best without paying anything or being obligated to buy. Sure they want you to do business with them, but they first want to educate. They are very good at hands-on, human-to-human help.

If there are items that in fact need an attorney's involvement, they'll tell you. But not EVERYTHING about creating an entity has to go through an attorney.

Laughlin Associates - 888-273-8152

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