You are missing my point: if you think you need a lawyer to review a document you obtained elsewhere, you're gonna have a bad time.
I have no problem with using a standard structure and replicating that across many many companies. That's smart. I be surprised if it wasn't done already.
BUT: once you stray from the One True Path to C-Corp, you're asking for trouble if you don't really dig in with a knowledgeable attorney who knows your industry, your goals, and how to keep you out of court. The Law is not something you can really hack.
IMHO, most people are better served by a simple LLC to get started. I'd agree that using a C-corp is a good idea if you're building a company specifically to seek investment from VCs, but if you're looking to just insulate yourself from the downside aspects of starting a business, it's hard to beat a LLC for simplicity.
First, as a partner in a business that has Fortune 500 company paper reviewed approximately once a week (a typical MSA is ~10-15 pages long and includes insurance requirements, liability, indemnification, and IP ownership), I'm not sure I understand this idea that lawyers aren't good at reviewing other lawyers documents. In my experience, reviewing other lawyers documents is 99% of the job of a lawyer.
Second, we are commenting on a startup that purports to have taken the ideal DE C corp structure from Y Combinator and put a web interface on applying it to new companies. That strikes me as remarkably close to the "one true path" you refer to. They're lawyers. They did YC. What else are you asking for? I'm 1000x more likely to want to use them than a random BigFirm lawyer who will --- again --- charge me $15,000 to get a worse structure.
Everything you said is 100% correct. It all makes complete sense. But I'll repeat my initial point just so we're clear about what my problem here is:
A website is not going to ask you questions about the special nature of your desired business structure. If you need something special, you're better off asking a lawyer to help you with that. A good one. Maybe the ones who did this.
That's my point. I was commenting on someone who was ready to have his lawyer "review" the document; which in my experience is one step away from "I'll make some adjustments myself and see what my lawyer says" which is one step away from "I'll make some adjustments myself" and FILE.
And once you've locked in a structure, it's way more troublesome and expensive to fix it after the fact. That's my point.
Respectfully, I think this "special nature of your business" stuff is handwaving. Most tech startups are fundamentally the same company. I'm prepared to simply agree to disagree with you on this, though.
>You are missing my point: if you think you need a lawyer to review a document you obtained elsewhere, you're gonna have a bad time.
I'm not sure why you keep saying this. I had my new lawyer review the botched up work done by the previous lawyer to determine what part to fix and what to throw away (part of the paperwork was already filed, so it had to be reviewed), and it wasn't a big deal at all. Sure it would be cheaper to use the paperwork from the new lawyer - he wouldn't have to read it, but your point of it being hard to do is not supported by my experience.
Clerky has advantage of scale - if everyone knows them except for your lawyer, you will pay your lawyer more to get acquainted with Clerky terms, but your partners/investors will end up moving quicker because they already know what it is. Time==money. Eventually, you will be able to shop for lawyer who already knows Clerky package, that's when it will be an even bigger win.
"you're asking for trouble if you don't really dig in with a knowledgeable attorney who knows your industry, your goals, and how to keep you out of court."
You sound like an expensive lawyer - or somebody who pays a lot of money to one. This simply isn't true for most people. However I grant you a lot of people feel the same way - and I'm sure their expensive lawyers love it.
IANAL. And you should apologize for calling me one.
But I have paid good money to lawyers and it was worth every cent.
Ask anyone who has ever had to fight a lawsuit (and won) if they thought they overpaid for legal advice. If you think the worst thing that can happen to you is you lose all of your money, BOY do I have news for you.
I fought a lawsuit with a paid lawyer and it was a huge waste of money. The process took years and ended as these things inevitably do when both sides aren't crazy litigious nutbags: with a settlement we could have worked out from the jump.
What I've learned about lawyers in the past 15 years is that about 49% of them are terrible. So processes that begin with "find a good lawyer" are a lot scarier to me than process that begin with "adopt this proven set of documents".
Not the person you were asking the question of, but if I can jump in...
These documents were created by a collaboration of attorneys from Orrick, YC, and a few other places. They are as proven as any forms you're going to get from any reputable startup lawyer.
Completely understand - it's actually something that I've thought a lot about as an attorney.
Any specific form is extremely unlikely to have been tested in court. Especially with startups and VCs. Law suits are incredibly rare because people like to fix things quietly. There have been a few though - and every good startup lawyer makes sure their forms account for those outcomes. But if you define "proven" to mean tested in court - there are probably no current forms out there that meet this definition (although on occasion, specific provisions may have been tested as part of a predecessor form that made it to litigation). The lawsuits are so far and few in between that it's hard to imagine there'd be a form out there that has not been updated since it was litigated.
I guess what I was trying to say is that the forms on our system are as proven as any forms you'd find elsewhere. And we're constantly getting feedback from lawyers to ensure that we always have the current best practices and market-standard terms in the forms.
And I mentioned Eduardo earlier in the thread only to highlight a point: for most orgs, these forms will be fine. There won't ever be enough money on the table to make an expensive lawsuit worthwhile. But once there is real money at stake, you had better be sure that you have everything buttoned up in your formation documents or someone will find an enterprising attorney to point out your mistake.
Zuckerberg had great attorneys. Maybe the best. He still had to settle with two different parties who felt they had a case.
Yes, it's an unfortunate state of affairs that even if there is nothing wrong with your documents, you may still get sued and it may still be in your best interest to settle (not saying that's the case with FB, but just speaking generally).
And I completely agree that if you need something custom or need advice, you should definitely talk with an experienced startup attorney. We refer customers to attorneys all the time!
Just to be clear though - it's definitely not an either-or proposition. A lot of our customers will go to their attorney, explain their situation, and ask "so, are the standard forms YC uses ok for us?" And because these documents are very standard (plain vanilla, as we lawyers like to say), startup attorneys are often either already familiar with them (especially so if they already represent YC companies) or it takes them very little time to review. Best of both worlds :)
You're trying to convince yourself, as buyers of all expensive things do, that you didn't waste your money. I'm sorry to inform you, you probably did. I've done it too. However, it's best to learn from our mistakes, not try to convince others to repeat them.
If you are a large and respected firm that handles plea bargains with a cookie cutter template for 90% cheaper than the cost of a private attorney, sure, we have a deal.
I was going on the assumption that I was guilty ;)
Being falsely accused of a crime and incorporating are not analogous. I agree that for some things paying an expensive lawyer is worth it. Incorporating is not one of them.
So maybe not all tangles with the law are equivalent in their need for specialized outside expertise, eh? Maybe it makes sense to think about it and maybe discuss with an actual attorney before you leap, eh? Maybe more than a few.
You know what every lawyer in the history of the World ever said to the question 'do I need the services of an attorney to help me with this?'
'Yes' usually followed by the amount of the retainer they'll need.
Your lawyer seems to have done great work selling you and I admire that. And you've now done a wonderful job of destroying your credibility, so others are unlikely to take your opinion seriously. My work here is done. Have a nice day!
I have no problem with using a standard structure and replicating that across many many companies. That's smart. I be surprised if it wasn't done already.
BUT: once you stray from the One True Path to C-Corp, you're asking for trouble if you don't really dig in with a knowledgeable attorney who knows your industry, your goals, and how to keep you out of court. The Law is not something you can really hack.
IMHO, most people are better served by a simple LLC to get started. I'd agree that using a C-corp is a good idea if you're building a company specifically to seek investment from VCs, but if you're looking to just insulate yourself from the downside aspects of starting a business, it's hard to beat a LLC for simplicity.