How to Use Legal Technology to Cut Down on Legal Expenses
Every penny counts for startups and small businesses, but some companies try to save money by neglecting to draw up contracts or to seek legal advice. This is penny wise and pound foolish. In the long run, your attempt at savings can cost your company, both in the event of legal action down the road and in lost opportunities.
While your frugal sensibilities may also be used to steer clear of uncharted waters to avoid risk, lawyers who have navigated these seas before can help you maneuver around legal pitfalls—and guide you to greater payoffs. This could include drafting your articles of incorporation, invoice terms or even how you budget. In today's market, finding and paying for legal advice has become much easier.
Lawyers Are Embracing Technology
The legal industry has been slow to make itself more efficient by using technology, but this is changing. New tools help lawyers automate processes, conduct research and even do contract reviews. Lawyers also use technology to make it easier for you to find a quality lawyer within your budget, or to do some of the legwork yourself.
The result: A wave of companies are taking advantage of technology to provide more affordable legal services to startups and small businesses. These legal websites are based on the premise that bringing down the cost of lawyers entices more startups and small businesses to use legal services.
Some websites help you find vetted lawyers who will undertake specific legal projects for a flat fee, which can include drawing up a contract or acting as general counsel for a certain number of hours per month. Other websites allow entrepreneurs to draft contracts that attorneys then review or to prepare and manage intellectual property. Still other websites provide diagnostic tools that identify gaps in legal coverage that open businesses to risk.
Here's a small overview of the types of legal services that are just a click away.
Experienced Lawyers for Flat-Fee Pricing
Companies like Legal Hero provide businesses with a vetted network of quality lawyers who agree to work on projects for a flat fee. Sound impossible? Not really. “Experienced lawyers know how long it takes to do various types of contracts and projects,” said Annie Weber, co-founder and CEO of Legal Hero.
Entrepreneurs and small business owners receive bids within hours for specialized projects. Or they can choose from typical legal projects for a flat fee. The company does intellectual property (IP) and immigration work on a national basis. For legal work governed by state law, Legal Hero currently operates in only four states: Florida, Illinois, Massachusetts and New York.
Reducing Legal Costs When Raising Money
Startups in Silicon Valley raising their first round of funding can spend upwards of $80,000 on legal fees, according to VentureBeat. Neither the entrepreneur nor the investor wants to see that kind of dough diverted from product development and marketing to lawyers. Enter iDisclose, co-founded by Georgia Quinn. "It takes a TurboTax-like approach, enabling entrepreneurs to do 80% of the work using an online tool that walks you through every step of writing legal agreements with investors," Quinn says. You still, however, need a lawyer to review the document.
The first product iDisclose launched is a Private Placement Memorandum (PPM). A PPM is a document that sets forth sales terms of a company's private equity sale to prospective investors. PPMs are so expensive—$35,000 to $100,000—that many entrepreneurs who raise money through Regulation D or online through equity crowdfunding platforms forgo the agreement.
That agreement, however, can be critically important. It protects entrepreneurs from being sued by investors and being scrutinized by the SEC for not disclosing information about the business. The iDisclose tool costs $5,000, and the follow-up lawyer fees are about $5,000; a substantial savings for small businesses.
Through Title II, Title III (approved but not yet implemented) and Title IV of the JOBS Act, entrepreneurs can now publicly market their securities offerings through crowdfunding platforms. Expect a series of products from iDisclose to address different types of contracts between entrepreneurs and investors, especially companies raising money through the different Titles of the JOBS Act.
Technology Automates the Immigration and IP Registration Process
The application process for work visas and green cards is burdensome and expensive, especially for startups and small businesses. Several websites now provide services in this area, including Bridge US, Teleborder and VISANOW, for those who want to control costs when recruiting talent from outside the United States.
Managing intellectual property registrations and obtaining patents, trademarks and copyrights is another area of the law that startups and small businesses find burdensome and costly. Firms such as Alt Legal offer an online process that makes it easy and less costly to manage intellectual property.
Minimize Risk by Protecting Assets
“You don’t know what you don’t know.” Never was that statement more true than when it comes to protecting your company’s assets. Traklight, founded by Mary Juetten, provides an online software tool that helps companies identify areas of exposure related to corporate assets. You can then shore up weak areas by creating legal agreements before problems occur. The online tool guides you through a series of questions that reveal answers to questions concerning whether or not the company has:
- Formed a business entity to protect personal assets
- Patented inventions and processes
- Signed an agreement with co-founders that specifies what happens if you go your separate ways
- Made agreements with employees and contractors specifying who owns the work produced
The startup world abounds with stories of companies derailed by legal problems they might have avoided with an up-front investment in good legal counsel. Now that technology is bringing down the costs of obtaining that counsel, you have no excuse not to take a few simple steps early on to protect your small business.