Accountant or Lawyer? What’s more important….when do I get one…?

If your venture ever does anything of note, you’ll likely need to retain the services of an attorney and an accountant. Of course, if you are building a startup and every penny is worth its weight in gold, you probably are trying to figure out how to balance the need for an attorney and an accountant and your ability to pay for their services.

These folks do not come cheap. Expect to pay no less then $100 an hour for any accountant or attorney worth a lick at a firm. In private practice or free-lance, they might be a bit less. In many cases, these folks cost much, much more. Very few industries have price dictated by the market as well as the legal world; expensive attorneys are expensive because they are good at what they do. Cheap attorneys are inexpensive because it is their only way to attract clients. Also, keep in mind that many attorneys often ask for a retainer up front. My experience has been that accountants may not.

On occasion, the attorney or accountant may offer to take equity in your company to provide their services. This is a terrible idea. (1) Your company will never be worth less then it is at the moment you decide you need their help. Giving them equity gives them an extremely amplified return on investment if you ever make any real money. (2) You will likely find yourself waiting in line behind their paying clients. My advice is to save up the money for the retainer or simply find a different attorney/accountant.

When should I go on and turn my financial record-keeping over to an accountant?

  1. When you begin hiring – and thus paying – other people.
  2. When you begin taking in revenue.
  3. When you find that your little hobby is extending out of your home office.
  4. When you decide you’d like to bring in investors and need to set up a company structure to do so.

There are other times you will want an accountant, obviously, but the chances are great you’ll run in to one of the 4 things listed above first. At that point you should flip the switch and turn things over to a professional.

When do I need a lawyer?

  1. When you decide to enter in to a partnership with another founder, client, or partner.
  2. When you decide to raise investment of more then a few hundred dollars from someone.
  3. If you decide to try and protect the intellectual property of your idea.

As with accountants, there are dozens of reasons to call on a lawyer. but the great likelihood is that you’ll run in to one of these reasons first.

Most attorneys and accountants will give you an hour of their time for free just to try and see if what you are trying to accomplish is something they can help with and is something they can fit on their plate. Before you go to these meetings, have a clear understanding of what it is you are trying to get out of the money you might spend with them. Are they there to write contracts? Or will you be using them to fight off IP infringements? Do you simply need someone to handle payroll, or someone to perform a cost-analysis study every 6 months?

When I met with my attorney for the first time, he asked me what it was I was trying to accomplish. I told him about my idea, about raising money, about growing, etc. He asked what I needed him for. My response, “Your first job is to keep me out of prison.” While it certainly sounds dramatic, we quickly reached an understanding that his primary function would be to help me and my associates navigate the legal landscape with which we were unfamiliar. As such, he realized he would be taking a lot of phone calls asking, “Can we do this?” or “Is it legal to do that?” not because we were trying to skirt the law but because our focus was making sure we always operated within it. Other things – contract writing, litigation, etc. – came secondary to making sure we kept our boat between the navigational beacons, so to speak. I recommend you do the same. It will make it much easier to find the right accountant or attorney when you decide it is time to look for one.

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2 Responses

  1. Nice Post. As a startup lawyer, I’ve had a couple people ask if I’d take equity in lieu of fees. I find it to be a bit awkward and thus haven’t done so. Too much of a conflict of interest, even though some jurisdictions allow such an attorney-client relationship.

    But you’re right. If you are considering partnering up with someone in your venture, you definitely must seek legal help. And the legal document(s) you can have drafted will benefit your company in both good times and bad.

  2. accountant…

    […]Accountant or Lawyer? What’s more important….when do I get one…? « Tech(st)Books[…]…

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