startup-costs, partnership, sharesHe’s gonna take care of all legal issues. Is 10% of net profit ok? If not, how much? Why? Thank you.
As a cofounder myself, I think you may be in trouble, and hope you tread carefully. It sounds like you need more time to think about this, and more money.
Could you you must be able to articulate what the lawyer brings, other than lawyering skills. Otherwise, you are wasting your time.
Why? First, if are considering a lawyer JUST because they are a lawyer, I presume you are doing it as a way to get legal services for “free”. Look into the cost of making an LLC. It’s under $1000 in many places, even with representation. If you don’t have $1000, you aren’t ready and should work on developing your skills more and saving more.
Said another way: “short-circuiting” legal costs fees by including a lawyer on your team is not a good hack. It is a very bad idea with very low value.
On the flip side: if your lawyer wants to do this deal, it suggest that your candidate lawyer is NOT the right lawyer for your team. A good lawyer should be busy and be making big bucks per hour. A good lawyer - by DEFINITION - will not have the time to invest in your company to make their 10% stake worthwhile.
On the other hand, if your candidate lawyer failed to succeed as a lawyer, why would you consider that person to join your team?
You MUST determine that the person has other skills.
Finally, what if you are wildly successful, and generate massive revenue? I promise you that your cofounder lawyer will NOT be able to make a dent in the legal needs of the company, and you will pay huge $$ to a firm to help you.
TLDR; Lawyers are NOT cofounder material, are not a clever hack to get resources for free. Lawyers who want join your startup may be signalling they are not skilled and should be looked at suspiciously. Lawyers are typically paid by the hour. If you can’t afford the relatively low cost of early legal fees for a new company (say, an LLC formation), you aren’t ready to start your company. Having a lawyer as a cofounder is only useful if that person brings OTHER skills to the field.
Suggestions to read: YCombinator and all of the Paul Graham essays. Get familiar with the software startup space. Very few lawyers are out there doing lawyer-ly things as cofounders.
I guess it depends on where you plan to take your company. Is 10% in a billion-dollar company fair for someone who will not be doing much for it at that point - because a billion-dollar company would need a lot of legal power, not just one person so at that point your lawyer partner will not be handling much of the legal work. On the other hand a lawyer can only provide legal help - they cannot help with growing the company, envisioning its future, managing its key projects, etc. which are much more valuable assets for building and growing a company. To summarize - for a small company with no ambitions - maybe it’s a good deal, because that person would handle all the legal stuff. For a big company or one that has ambitions to become one - a lawyer, in my opinion, is not an asset worth a 10% stake.
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