Startups

When is it time to hire a lawyer for your startup?

Free resources can get you to a point, but the legal side of launching a business is like taking your car to a mechanic, lawyer Abe Kwon says — it's usually better to outsource the work.
Though building a startup is far from a cookie-cutter experience, every founder will get to a place where they need legal counsel.

Abe Kwon, a startup and venture capital lawyer with Troutman Pepper, has been serving the startup space in Philly for the last decade and has seen it all when it comes to building companies. He said although it is a cost, adding legal counsel to your startup’s growth expenses is like scheduling routine maintenance on your car.

“When I go to get my car serviced, what the mechanic will say usually goes above my head,” Kwon said. “Unfortunately, that type of situation can happen to startups. But there’s an incredible amount of resources online, and no founder needs to become an expert when it comes to the legal issues. Their time is much more valuable elsewhere.”

There’s a number of things a startup will need legal eyes on, from incorporating a business, to allocating equity between cofounders or early employees. You’ll also want eyes on commercial agreements, hiring employees, taking investments and potentially company policies. And as your company grows, your needs will change.

Free and local legal resources for startups’ earliest days

Abe Kwon. (Photo via LinkedIn)

In the early days of a company, being cost-conscious is important. There’s a wealth of online resources that can walk a founder through the first steps of incorporating or hiring contractors.

There are also Philly-specific resources, like the Detkin Intellectual Property and Technology Legal Clinic at University of Pennsylvania’s law school that works with startup founders on a variety of needs, and Drexel University’s new Center for Law and Transformational Technology which strategizes on the legal framework surrounding tech innovation, especially in newer disciplines like blockchain, AI and cryptocurrencies.

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At the start of the pandemic, Ballard Spahr created a program offering free legal advice to business owners, entrepreneurs, people who were thinking of starting businesses, and anyone who might have legal business questions. Its Ballard Academy for Student Entrepreneurs also offers pro-bono legal assistance on discrete issues facing potential ventures for student entrepreneurs.

So, why hire a startup lawyer?

Plenty of firms offer free resources for founders, but at minimum, most startup lawyers will at least have a conversation with a founder to find out about their needs and see if they can assist, Kwon said. Besides his firm, some groups that service the startup space in Philly include Morgan LewisBallard Spahr, Royer Cooper Cohen Braunfeld, Growth Counsel and Cozen O’Conner.

“It can be difficult because startups are not cookie cutter,” Kwon said. “Founders will come to us and want to know what we’ve told other founders, but there’s no one-size-fits-all answer at every step.”

Though founders can get themselves fairly far with online resources or free counsel, there’s sort of a point of no return, Kwon said. It’s easier to bring in counsel as you’re setting up the company, rather than work backwards: The two hardest things to fix are not properly and legally setting up the equity split between founders, and incorrectly assigning intellectual property.

“Most other things can be remedied retroactively, but those things will really bite them in the butt,” Kwon said. (For further reading, check out this story on some of the worst mistakes a startup can make, from company formation errors to “dead equity,” via three entrepreneurship lawyers based in Pittsburgh.)

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In his decade in Philly, Kwon said it’s become his main goal is to contribute more actively to its growing startup ecosystem. He tried his hand at entrepreneurship before his law school days and spent time in New York City before coming to Philadelphia.

“The startup and venture capital ecosystem here might not be not as mature as others, but people like us know there’s lots of interesting startups,” Kwon said. “The Philly ecosystem has solidified.”

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