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What Start-Up Companies Can Gain From An Outside General Counsel

Legal Developments, Other

Every company—no matter its size or stage of development—faces legal issues that would be best handled by an experienced in-house counsel. But for many start-up companies establishing a corporate legal department is difficult to justify when so many other operational priorities require precious company resources.

An outside, or outsourced, general counsel can help bridge this gap. Outside general counsel are law firms that assign an attorney or group of attorneys to provide dedicated in-house legal services. An outside counsel arrangement can give entrepreneurs many of the benefits of having a GC on staff without the logistical and financial issues involved in setting up and maintaining an in-house legal department. 

The Benefits of Working with an Outside General Counsel

Working with an outside general counsel can provide numerous benefits, including: 

Strategic Business Advice. Outside general counsel can provide an objective, external view of the company’s strategy, and they may serve as a resource for start-up executives looking for ways to finance and expand the company. In our experience at Guzov LLC, start-up leaders often seek counseling about the operations and structure of their businesses – and they rely upon an outside GC’s intimate knowledge of their business to help guide their decision-making and growth.

Greater Efficiency. Entrepreneurs who take a do-it-yourself approach to their start-ups’ legal needs routinely find themselves mired in matters that could have been solved quickly by an experienced attorney. An outside general counsel can respond rapidly to legal issues and free executives to spend their time on the issues that matter most – namely growing and managing their businesses.

• Manageable Costs. To hire a GC, a start-up must budget for salary and benefits, recruitment expenses, and potentially, offer equity in the company. An outsourced general counsel simply charges a regular fixed fee for a menu of in-house legal services.

• Reduced Risk. The last thing a start-up owner needs is a compliance or litigation issue that threatens to drain company coffers and scare away potential investors. Outside general counsel can regularly examine companies for litigation and other risks and create strategies to help address and reduce risk. An outside GC can also ensure the company is meeting the regulatory requirements associated with its products or industry and avoid fines and legal action by government agencies. 

A Deeper Understanding of the Business and the Start-Up Process

One of the defining traits of outside general counsel is their understanding of a start-up’s business. An experienced outside GC will be able to anticipate legal issues based upon their previous work with other companies. And because they are an integral part of the company team, they will have a deeper understanding of the corporate culture and strategy than in a typical law-firm client relationship. This deeper knowledge helps the outside general counsel give advice that is better aligned with the company’s strategic objectives.

An outsourced general counsel will also understand the unique issues facing a start-up company depending on its stage of development. The needs of an early-stage company seeking Series A financing are quite different from those of a late-stage start-up on the verge of an initial public offering or a merger or acquisition. 

For instance, a company in its earliest stages may need contracts for new employees, review of leases and other key agreements, and advice on the type of legal entity that will best serve its future growth and financing needs, among other issues. As the business grows and its foundation is in place, the outside general counsel can take a proactive approach to risk, helping educate the team on what it should—or should not—be doing on matters across the legal spectrum. 

Outside General Counsel Offer Greater Flexibility for the Company

A general counsel has three primary roles: serving as legal advisor to the company and its staff; acting as lead on any legal issues facing the company; and providing legal services, such as drafting agreements or managing corporate governance issues.

In an outside counsel arrangement, a startup can expand or limit the amount of work the lawyer does depending upon its needs at a particular moment. The outside GC can take all of the primary duties of an in-house counsel or some of them—a measure of flexibility that allows the company even greater control of its legal costs.

Guzov LLC’s lawyers have deep experience helping startups as well as established businesses navigate their unique legal needs. To learn more about how an outside general counsel can serve your business, contact us for a consultation, or visit our practice area page, Your GC

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