When Should a Startup Hire Its First Lawyer? A Founder's Guide

For any startup founder, the question of when to bring in legal help is a critical one, balancing tight budgets against significant risks. The consensus isn't a single date on a calendar, but rather a series of milestones and events that should trigger a call to a lawyer.

The Co-founder Conundrum

One of the earliest and most debated points for hiring a lawyer is at the formation of the founding team. There are two distinct schools of thought:

Lawyer Up Immediately: One perspective is that you need a lawyer the second you have a co-founder. This ensures that equity splits, roles, responsibilities, and vesting schedules are clearly defined in a legally sound operating agreement, preventing potentially company-ending disputes down the road.
The Bootstrapper's DIY Approach: Conversely, for early-stage, bootstrapped startups, some lawyers might even suggest that founders can handle the initial LLC setup and operating agreement themselves using online templates. The key is that this is usually only advisable before significant assets or outside investment are involved.

Non-Negotiable Triggers for Legal Counsel

Regardless of your approach to incorporation, there are several events where hiring a lawyer is universally considered essential. Engaging legal expertise at these stages protects the company, its founders, and its future.

Intellectual Property and Patents: If your startup's value is tied to IP, legal guidance is crucial. One particularly insightful tip relates to patents: while you can file a provisional patent yourself to establish a filing date, you should have an attorney write and file the full non-provisional (utility) patent. Simply asking a lawyer to convert your self-written provisional filing is often a path to rejection; the full application needs to be professionally drafted to maximize the chances of it being awarded.
Accepting Outside Investment: The moment you start raising capital, you need a lawyer. Term sheets, shareholder agreements, and compliance with securities laws are complex and have long-term consequences.
Signing High-Value Contracts: Whether it's a major sales contract, a critical partnership agreement, or an office lease, having a lawyer review the terms can save you from hidden liabilities and unfavorable conditions.
Receiving Legal Threats: If you receive a cease-and-desist letter or any other threat of legal action, your first call should be to a lawyer. Do not attempt to respond on your own.

A Phased Approach to Legal Costs

For most startups, a full-time, in-house lawyer is an unnecessary expense early on. A more practical and cost-effective model is to engage with an external lawyer on a fractional basis. You pay for their time as needed for specific tasks. A common rule of thumb for hiring full-time is to make the move when your spending on the fractional lawyer begins to exceed what a full-time counsel's annual salary would be. This ensures you have the support you need without over-committing your budget too early.