Startup Lawyer Fees

How startup lawyers charge: a flat formation package, then hourly

Incorporating a startup is flat-fee work, commonly $2,500–$5,000, because the scope is knowable before anyone starts: a Delaware certificate of incorporation, bylaws, founder stock purchase agreements with vesting, invention assignments, 83(b) instructions, the EIN, and the first board and stockholder consents. A bare incorporation with none of the equity documents is cheaper and close to worthless.

After formation the model changes. Hourly billing at roughly $300–$700 covers advice, hiring questions and anything negotiated, while a first financing is usually quoted as its own flat fee — about $2,500–$7,500 for a SAFE or convertible note round and $15,000–$30,000 for company counsel on a priced seed. Some firms offer a monthly retainer for ongoing access once there are employees.

Deferral is common enough to be worth asking about. Many startup practices will defer part of the formation fee until a first financing closes, and in a priced round the investors’ counsel fee is customarily paid by the company from the proceeds, subject to a cap negotiated into the term sheet. Neither is a discount; both appear on the closing statement.

Whatever the model, put the scope in the fee agreement: which documents are included, how many founders the equity package covers, whether the option plan and the first offer letters are in it, and what converting an existing LLC would cost. Ask who does the drafting, because partner time on a standard stock purchase agreement is poor value. Ask what tips the engagement into hourly.

Attorney fees, Delaware’s bill, and the 409A: what sits outside the quote

Two different costs make up the price of getting a company off the ground, and a good quote separates them the way litigation separates fees from case costs. The attorney fee pays the lawyer. Everything else goes to a state agency or an outside provider.

Delaware takes the first slice. The filing fee for a standard certificate of incorporation is currently under $100, a commercial registered agent runs roughly $50–$300 a year, and every domestic corporation owes an annual report fee plus franchise tax each year whether or not it earns anything — confirm the current figures with the Division of Corporations before you budget.

The franchise tax has a trap worth knowing about. Delaware’s default authorized-shares method can produce a five-figure bill for a company that authorized ten million shares, which is the standard startup number, and the fix is to recalculate using the assumed par value capital method, which for an early company usually lands near the statutory minimum. The notice looks like a catastrophe and is almost always an arithmetic problem.

The other outside costs arrive as you grow: a 409A valuation at roughly $1,000–$5,000 before options are granted, foreign qualification and payroll registration in every state where someone works, blue sky notice filings after a raise, and brand protection through a trademark filing. None of these is legal advice and none should be buried in a legal fee.

Delaware C corporation or LLC: the choice that decides whether you can raise

An LLC is an excellent wrapper for a profitable operating business with a few owners and no outside money, and the wrong one for a company that intends to raise institutional capital. This is the single decision on this page that is cheap today and genuinely expensive to reverse.

The reasons are structural rather than aesthetic. Venture funds have tax-exempt and foreign limited partners who do not want the pass-through operating income an LLC generates, preferred stock with liquidation preferences and protective provisions is a corporate instrument, and essentially every fund’s standard documents assume a Delaware corporation. Asking a fund to invest in your LLC is asking it to pay its lawyers to rebuild something it already owns.

Employee equity points the same way. An LLC cannot grant incentive stock options at all; the analogue is a profits interest, which is unfamiliar to candidates and awkward to explain. C corporation stock may also qualify for a significant federal capital-gains exclusion after a multi-year holding period subject to a per-issuer cap, and 2025 legislation changed both the periods and the thresholds for newly issued stock — a real reason to incorporate early, but confirm the current rules with a tax adviser rather than assuming them.

Delaware itself is chosen for predictability: a well-developed corporate statute, a specialist court, and documents every investor’s counsel has read before. Converting an LLC to a Delaware corporation later is routine but costs real money and can reset holding periods. If you are building a services firm or a local operating company instead, the business page prices that work.

Founder equity, vesting, and the 83(b) election

Founder stock should vest, and it should vest even among friends. The convention is four years with a one-year cliff, often with some acceleration if the company is acquired, and the shares are bought at formation for a nominal price while the company is worth almost nothing.

What vesting actually buys is protection against year one. A co-founder who leaves at month seven under a vesting schedule walks away with nothing and the company keeps the equity; the same person without vesting keeps a third or a half of the company forever, contributes nothing further, and dilutes everyone who stays. Investors call that dead equity, and it is a common reason a promising seed round does not happen.

The 83(b) election is the item on this page with no second chance. Restricted stock is otherwise taxed as it vests, on the spread between the price you paid and the value at each vesting date, and the election lets you be taxed instead at grant, when the stock is worth essentially nothing. It must be filed with the IRS within a short, non-extendable window measured from the date the stock is transferred — commonly described as thirty days — so confirm the current deadline and filing procedure with a tax adviser immediately, not eventually.

A founders’ agreement should answer the questions nobody wants to raise. Who owns what and why, what happens to unvested shares and to the idea if someone leaves, who makes which decisions, who is full time and from when, and what the company can repurchase and at what price. Settling that before drafting turns a negotiation into paperwork.

Owning what you built: IP assignment, contractors, and first hires

A company does not automatically own what its founders made before it existed. The document that fixes this is a confidential information and invention assignment agreement, signed by every founder, which assigns the pre-formation work along with everything created afterwards and lists anything deliberately excluded.

Contractors are the harder problem. An independent contractor generally owns the copyright in what they create unless there is a signed written assignment, because “work made for hire” covers a narrow list of categories that does not include most commissioned software — so the designer who drew your logo and the developer who wrote your first backend own them until they sign something. This is exactly what acquisition and financing diligence looks for, and an unassigned contractor who is now unreachable, or who understands their leverage, can hold up a closing.

Classification is the next trap. Whether someone is a contractor or an employee is decided by the working relationship rather than by the label on the invoice, and getting it wrong exposes the company to back payroll taxes, penalties and wage claims — the overtime page explains how those claims are priced.

First hires need less paper than founders expect and more care than they give it. An at-will offer letter stating salary, role and that any equity grant is subject to board approval under the plan, plus the same invention assignment agreement, covers a standard employee. Avoid promising a percentage of the company in writing, and have a lawyer look at any non-compete or deferred-compensation language before it goes out.

The cap table, the option pool, and the first money in

A cap table is a spreadsheet until it is not. Three founders and a round number of shares fits in a sheet; options at four different strike prices, three SAFEs at different valuation caps, a pool that has been increased twice and a note with accrued interest do not, and the errors compound silently. Dedicated cap-table software is cheap, and investors increasingly expect it.

The option pool is where dilution first bites. Companies typically reserve ten to twenty percent for employees, options must be struck at fair market value established by a 409A valuation or the recipient faces penalty tax, and investors in a priced round usually insist the pool is created or topped up pre-money — which means the existing holders, not the new investor, pay for it.

SAFEs and convertible notes are the usual first money because they are fast and defer the valuation argument, and the dilution they cause is routinely not modelled. Several instruments at different caps all convert at the same moment, alongside the new pool and the new investor’s stake, and founders who expected to give up fifteen percent discover they gave up twice that. Build the conversion into a spreadsheet before signing, not after.

A friends-and-family round is a securities offering, which founders almost never realise. Selling stock or a SAFE requires registration or an exemption, in practice Regulation D, which depends on your investors being accredited — currently around $200,000 of individual income, $300,000 jointly, or $1 million of net worth excluding a home, though the SEC revises these, so confirm. A Form D is due within fifteen days of the first sale, state notice filings follow, and an unaccredited investor who later wants their money back may have a rescission right.

Why your state matters: Delaware is not where you live

You will probably incorporate in Delaware, and that changes less about your local obligations than founders assume. The company still qualifies as a foreign corporation wherever it actually operates, registers for payroll in every state an employee sits in, and pays that state’s taxes — two sets of filings, two registered agents, and two annual bills.

California is the state that most changes how a startup is built. Section 16600 voids most employee non-competes, so your engineers can leave and start a competitor and your offer letters cannot stop them, and recent amendments bar employers from even including such a clause. California also charges an $800 annual minimum franchise tax on corporations doing business there regardless of where they were incorporated; confirm the current amount and whether any first-year exemption applies.

Most other states take the opposite approach. New York and the majority enforce a non-compete that is reasonable in duration, geography and scope, while a growing group — Washington among them — restrict them by salary threshold or advance-notice requirement without banning them. Legislatures are unusually active here, so confirm where your state currently stands before you rely on either answer.

The practical rule is that employment paperwork follows the employee, not the certificate of incorporation. A Delaware governing-law clause will not reliably import Delaware rules over the protections of the state where someone actually works, which matters for non-competes, final-pay timing and expense reimbursement. Ask local counsel which of your templates need a state-specific version.

Choosing a startup lawyer and keeping costs down

Firstly, settle the business decisions before the first meeting. The equity split, who is full time and from when, what each founder is contributing, and what happens if someone leaves are not legal questions, and arriving without answers converts a flat-fee drafting job into hourly mediation. Most startup practices offer a free consultation that will tell you which of your questions are actually legal ones.

Secondly, be honest about what a template can do. Mutual NDAs, standard contractor agreements, advisor agreements and plain at-will offer letters are fine from a reputable public form set used without modification. The charter, founder stock with vesting, the invention assignment agreements, the equity plan and anything an investor hands you are not — those are the documents whose defects surface years later, at a closing, with no time to fix them.

Thirdly, do the free and cheap parts yourself. The EIN is free directly from the IRS, Delaware’s annual report can be filed online without help, the franchise tax recalculation is arithmetic, and cap-table software costs less than an hour of legal time. Accelerators, Small Business Development Centers and university clinics provide genuine startup legal help at no cost, and the options when you cannot afford a lawyer include law school transactional clinics in most states.

Finally, spend on the things that cannot be repaired. Unassigned IP, a missed 83(b), handshake equity and an unreconciled cap table are each cheap to prevent and expensive to fix under deadline, and the worst of them end in a founder dispute billed hourly through business litigation. The formation package is the least glamorous legal purchase a founder makes and the one that reliably repays itself.