Tough question; all startups are unique so it hard to say but it largely depends on what stage your startup is at. If your startup is at a point where you are facing daily legal questions then hiring someone in-house makes sense. However, you would likely be wasting money to hire an attorney to your full-time staff if you need help with merely forming your company and writing customer agreements. The financing stage of your startup is very, very important so an attorney is advisable, but the need for some in-house is not always necessary.
The following criteria should also aid you in determining whether your startup should hire its first in-house attorney:
- Whether your outside counsel is meeting your expectations. If you find that the attorneys you have used up to this point are unable to fully grasp your business then it may be smart to have someone on the inside. An in-house attorney for a startup typically ends up doing much more than legal work as a result of startups being so bootstrapped and devoid of everyday legal issues. This can be a great thing as the attorney stays abreast of the day-to-day operations, but you may be paying a lawyer at a hefty salary for doing tasks that a paid intern could be doing at a fraction of the cost. Thus, hiring the right outside counsel may be all you need.
- Whether you are spending an exorbitant amount on outside legal fees. This one is pretty straight forward. If your accounting shows that you are spending an amount close to or higher than the cost of hiring someone inside then the decision should become easier. However, similar to outside counsel who takes too long to respond, it may just be a matter of finding a more affordable outside attorney.
- Whether members of your staff are currently serving as pseudo-lawyers. If you or your staff currently spends a considerable amount of time Googling answers to legal issues then it might be time to hire someone. Entrepreneurs should always be looking ahead at potential problems and this surely falls under that category. Although you may think that you are saving money now the cleanup project down the road could be triple the cost.
If your company is indeed ready to hire an attorney full-time then I suggest you take a look at an answer I posted in the past regarding the importance of hiring an attorney from a well-known law firm. In short, the answer is that often a small firm attorney is the best choice when you consider: 1) Experience, 2) Professional Chemistry, 3) Price, and 4) Reputation.