Uncomfortable Conversations You Don’t Want to Have With Your Start-Up Lawyer

These conversations are ugly.

But I’m not scared of ugly.

I try to have these conversations with my clients when they are doing well, have money, are growing, and the sky is blue. But, occasionally, especially for the first time entrepreneur team, at that point, even though they’ve been referred to me by someone who says, “she tells it like it is” they don’t want to listen.

In the hopes that you are here because you do want to listen — here goes:

First and foremost – That money in the bank account is not yours. If you decide to shut down your start-up and you move money from its bank accounts into your own, or others who aren’t *legally* entitled to it, you may be *personally* liable.

I know. I know. You want to pivot. You think that money is yours. You think you *need* it to pivot. But contract law and employment law (and god help you, tort law) all have first dibs on that money – if you move it, you are giving your creditors a good argument that they should be able to come after you personally. Pivot from within the corporate entity — don’t try to divert the cash.

Second — When I explain bluntly *why* you may want a termination for convenience, even when your customers insist you don’t need one — it’s because when you are running out of money and want to shut down your non-profitable contracts, you won’t be able to pick and choose what customers to terminate without one.

Third — when I explain carefully *that you must not specify detail X* if you need the flexibility you have told me is essential – you are not in a good spot if you later specify detail X with particularity in a written contract in order to close a deal with a customer who later comes back with a nastygram demanding performance on the detail you were trying to avoid.

Finally, at the end of the game, if you come to me and demand legal assistance for “continued relationships” and “good will” and “recommendations to your peers” please be sympathetic to my perspective.

Like your fledging business, mine is one that makes or breaks it by collecting on bills due and payable. Only, unlike a venture-backed business, I have no free checks from people who are betting on my future success to run with.

For me, it’s do or die, every month (my staff gets paid, regardless of whether I do). As such, my firm is not likely to put much stock in a continued relationship, good will, or recommendations to peers of a company who didn’t think it was important to pay for the services they consumed.

Yes — I understand that there are large law firms out there who are willing to float businesses with tons of potential for months or even years. If you can get them to do your legal work for a future promise of payment, you should take that deal. It’s amazing. Unfortunately, while I wish I was cash-flush enough to do so, I can’t offer it.

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