When you start a company, one of your key advisors will be the corporate attorney who helps set things up. In Silicon Valley, the process feels all but automated: Hit the “New Company” button on your computer, and get a mountain of standardized documents in return. Most entrepreneurs, eager to get down to the real work of building a business, sign off without too much thought. The paperwork ends up in a drawer or a safe deposit box, rarely touched and almost entirely forgotten.
If you are lucky, as I was, your corporate attorney will be fantastic. My attorney helped me navigate deals with overseas customers and strategic partners, teaching me the ins and outs of good and bad agreements. He was both mentor and cheerleader, and I trusted him implicitly. He showed up at board meetings, recorded the corporate minutes, and kept us from doing anything stupid.
But he was not my attorney. He was the attorney for my company. This might seem like an irrelevant detail, but don’t be fooled. Once investors enter the picture and join your board, the fact that the company attorney is not your attorney becomes a lot more than a mere technicality. Should things go south between you and your board, the corporate attorney will quite literally not be able to speak with you. You’ll be on your own.
That’s just one reason you need a personal employment attorney, sooner rather than later. You’re more likely to find your attorney in a boutique law firm, because big law firms would have too many conflicts of interest with the big employers they also represent.
Here’s what a personal attorney can do for you, long before either you or your board are looking at an exit.
Improve those boilerplate corporate documents. At your company’s inception, you have the opportunity to revise the standard documents and to make them work for you. In Silicon Valley, the assumption is that everyone wants venture financing. So most standard-issue documents are written to be as “vanilla” as possible, helping investments go smoothly. However, you may not be planning on venture financing, so make sure the incorporation documents apply to you, not just the ‘average’ founder. A personal attorney can look out for the interests of you and your family by making sure the documents address situations of disability and death, which are often ignored by the standard paperwork.
Get business relationships and commitments clear and crisp up front. I’ve seen countless entrepreneurs work really hard to develop a business plan with a partner only to be left out in the cold at a later date. Sometimes an investor only wants to back one of multiple partners. It’s never a pretty scene. A personal attorney can make sure your agreements cover this type of situation, and others. That way, when emotions are running high, there is a clear resolution.
Negotiate an employment contract. If you’ve been an “at-will” employee your entire career, this will seem unfamiliar and a bit daunting, but a good attorney can help. Needless to say, it’s easier to do this when everything is going well.
An employment agreement not only spells out your compensation, but also details what happens when you leave the company. This is hugely important, and not just about cash. There may be equity in multiple forms, health insurance or compensation for health insurance, and protections against disparagement.
A good attorney will know what the current trends are in employment agreements, so he or she will know what you can reasonably ask for. An attorney will also explain the risks and consequences of different options, including the tax consequences. For example, when you leave your company, you might receive health insurance coverage for a year or more, or you might get cash so you could buy insurance yourself. But what if the company goes out of business? What are the tax consequences? See why you need an attorney?
Exit. Yes, your attorney will help you if you get kicked out of your company. But if your company is sold, it’s not uncommon for an entire management team to hire a single attorney to represent the group. There are all kinds of retention bonuses – above and beyond the mere sale of stock – that the acquirer might be able to offer to key employees. An attorney can help you make the most of them.
If you don’t have a personal attorney and find yourself in a bind, all is not lost. These folks seem accustomed to emergencies. Bring your corporate documents to them, even if you don’t have an employment agreement. They may still be able to help. You need someone in your corner!