STARTUPS SHOULDN'T DRIVE IN THE LEGAL FAST LANE
Updated: Apr 20
Hey, startups! Don't “zoom” around your legal matters, make sure you have adequate legal advice and guidance for your company.
Let's get real — Choosing a company structure is much more than simply filling out documents. If you're trying to form your startup's corporate structure, you need a professional to handle that for you. You don't build your own home or engineer your dream car, so why take your business legal matters into your own hands and hope it works out?
An experienced business attorney is an incredibly valuable investment that you can't afford to skimp on and here's why...
one startup, one mistake
The Background — Client X is a startup tech company located in Houston, Texas. As a new company searching to get their business up and running as soon as possible and in the cheapest way possible, Client X rashly decided to forego the “business attorney” route and chose to put their trust in a widely known automated legal website that helps startups and small businesses but actually has zero attorneys on staff unless you choose to pay for their services... I'm sure you know who we are talking about. ;)
After reading numerous blogs on the company's website in an attempt to determine the best business formation for themselves, Client X chose to become an LLC. Unassured in their decision, they were told by a customer service rep the formation could change if it wasn't fitting.
SO WHAT HAPPENED YOU WONDER?
Note: The below may be graphic or unsuitable for some readers... Business Law Guidance is highly suggested.
The Consequences — After choosing their own business formation, Client X paid an additional $600 to get the “all inclusive formation plan” that was supposed to complete and file all of their paperwork with the correct governmental departments, but instead they received a large packet full of paperwork incomplete. Included in the paperwork, Client X's co-founder was surprised to find that she was named the registered agent, meaning she was the one responsible for ALL legal matters and correspondence. Basically, any legal matter to arise would become her responsibility to answer to.
WAIT, WHAT?? SHE'S RESPONSIBLE? BUT THAT'S NOT ALL...
When Client X originally started the “simple” formation process online, the company name they were operating under was “approved” through their software, but that wasn't true at all. They declined the company name after 8 weeks into the process, citing that another company within the same state, formed 10 years prior, had a very similar name. They gave Client X 2 options - choose another business formation in hopes of keeping their name or write the other company a letter requesting use of the name.
Here's where it gets tricky - that company was not in business any longer and Client X was concerned the letter may not ever get responded to. Client X didn't have time to wait around for another company that may or may not answer snail mail. They needed to hire employees and get work done on their projects! After really analyzing the other company name they were being compared to, Client X decided to appeal the name similarity as the spellings and meanings were completely different.
The Aftermath — So fast forward 13 weeks later and they are finally an approved LLC registered in the state of Texas. They still aren't sure they should be, but that's beside the point... Only 25 percent of the paperwork that was paid for actually got done through this big automated legal website, plus countless hours were wasted doing work they paid them for. They were overwhelmed, annoyed and frustrated.
one law office, one happy ending
After the company's unnecessary and disastrous experience with the big legal website, Client X decided to look for an experienced attorney for guidance. And that's where we, StrahanCain, come into the story. Because we would have handled ALL OF THAT in just 2 weeks!
What we did — We scheduled an initial consultation with Client X to learn more about the company's vision and help define their goals —
Ensured their formation was adequate
Completed and filed all of their startup paperwork
Defined an optimal tax structure
Ensured they were scalable and ready for growth
Facilitated employment agreements
Made them feel at ease
Moral of the story - go with the pros before zooming through your business formation. We are knowledgeable, experienced lawyers who take the time to answer your questions and fully understand your business needs before helping you form your business.
For more information on our Corporation Formation Package, schedule your free 15-minute consultation today!