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The process of creating a startup should be exciting. You can finally bring your dreams to life. But you need to make sure that things are created properly. This means carefully checking the legalities. While legal fees might be an additional upfront expense, they will save you significantly over the long term. Let’s take a closer look at the type of startup lawyer cost you could face.
Start With Entity Formation
The first thing to expect is to form a legal entity. During this process, your lawyer will help you make your business official. This includes registering your company. If you want to save some money, you can shop around for the best incorporation state. Just remember to look beyond the initial incorporation fees and examine the ongoing taxes you’ll be paying. Initially, this can cost a few thousand dollars. For most startups, forming a legal entity costs between $2,500 and $5,000 (Feel free to edit these numbers and link to your website)
Protecting Your IP Is Expensive
Your intellectual property (IP) is the most important part of your startup. It’s the thing that will separate you from your competitors. Because of this, you’ll want to hire a lawyer to protect these ideas.
There are a few ways that your lawyer will protect your IP. First, they can use trademarks to assert your copyright. This will stop anyone else from stealing things like your brand name or logo. Larger companies get dozens of trademarks, protecting every aspect of their brands. Startups will need to be more selective. A lawyer can help you pick which elements are the most important. Getting a trademark is fairly cheap. It costs between $250 to $350 to file the application. This can be between $300 to $600 once you factor in legal costs.
That’s not all, you’ll need to make sure that your inventions aren’t stolen. Because of this, most companies opt to get patents. This allows you to sue anyone who is caught using your idea. The problem is that filing for these patents can be expensive. You can expect to pay between $8,000 to $10,000 for the patent. Worse, you might need to file for multiple patents to fully protect your ideas. This is where you will face the largest lawyer startup cost, so budget accordingly.
You Can Save Money On Contract Drafting
Once you are ready to start hiring, you’ll need to begin drafting contracts. These will outline your arrangements with vendors, employees, and freelancers. These will lay out your expectations and set out your obligations.
You can save yourself some money by drafting the contracts yourself. You can get a template online. Then, you can customize it to suit your organization. When you have finished, though, you should ask a lawyer to check it. They will be able to spot any holes in your agreement. Though drafting it yourself should keep the costs low, you should still budget a few thousand dollars for this process.
Checking Stock Agreements
As your company grows, you might want to start attracting investors. Usually, they will want a share of the business. Some companies take this one step further, offering shares to their employees. This can quickly lead to complex legal documents, as you need to outline how many shares are being issued. You’ll also need to outline the technical details, like when the shares will vest.
You can save some money by downloading a template and filling in the specifics yourself. But it is wise to have a lawyer look over the document. Because these documents can be quite technical, it can take a while for them to check them. It’s best to budget a few thousand dollars.
Legal Costs Grow With Your Company
These are just the basic costs involved with starting your company. As you grow your startup, your legal costs will also expand. Larger companies have lawyers on retainer. This allows them to seek advance on legal problems whenever they arise. It also allows the lawyer to spend time getting to know intricate details of the business, making it easy to defend you in court cases. A retainer for a good lawyer will cost a few thousand a year.
Legal Costs Can Vary
These costs are just intended to give you a basic guide. In reality, prices can move around. Things like your geographical area and the complexity of your case play a huge role in the price you’ll need to pay. It’s also important to consider the type of startup lawyer you are using. Larger firms have more resources but will charge a higher price.
You tend to have a little leeway in the prices you are charged. You might be able to change the billing arrangement. Fixed-fee lawyers tend to be cheaper. If you are concerned about the price, you can set a billing limit. This prevents unexpected cost increases.
Conclusion
When you ask how can your startup business avoid costly litigation, there is only one answer. That’s to hire a good lawyer. This will be a large expense, so you must budget accordingly. But getting the legal elements right will pay dividends over the long term.