5 Ways Start-up Companies Can Reduce Legal Costs and Legal Risks

Written by Colton Manton
JD Candidate 2025 | UCalgary Law

Occasionally, start-up companies are lucky enough to benefit from a great idea, founders with previous business experience, or a base of customers right out of the gate. One thing that is not often part of that list is an amount of capital that is more than sufficient to meet the early needs of the company. There is a limit to the funds the founders (or their Uncle Jim) can contribute to the company before any kind of outside investment, and there are many costs associated with incorporating, hiring the first employees, and developing intellectual property. Start-ups are generally not incredibly keen on adding hefty legal bills to that list. What follows are five ways start-up companies can reduce their legal bills and risks at the early stages of their journey.

1 - Use a Free Legal Clinic

Legal clinics are an excellent resource for start-up companies and small businesses when money is tight. There are often some very bright and eager students ready to help. In the case of our Business Venture Clinic, we work with supervisor lawyers to help ensure we are providing a quality work product.
On the flip side, it is essential to note that the students volunteering at legal clinics are not lawyers, and some risks are associated with receiving work from them; students don’t have practice insurance like lawyers do, and they (most likely) can’t be sued in the unlikely event that something goes wrong. They don’t have all the training and knowledge of a practicing lawyer yet. Obtaining the services of a free legal clinic is a business decision, and the pros and cons of saving on legal fees and obtaining work from a student should be compared for each different legal task at hand.

2 – Find a Law Firm that will be Flexible or Creative with Payment Options

Occasionally, a law firm will allow a start-up company to defer the payment of their legal fees until they receive their first round of financing. In other cases, law firms have accepted an equity stake in a company they advise in lieu of payment. You might want to consider one of these payment options, depending on your situation.

3 – Arbitration

If they haven’t brought it up with you already, consider discussing arbitration clauses with your lawyer. Arbitration can be faster, more efficient, and less expensive than the traditional court system. In addition, if the subject matter of the potential dispute is sensitive or confidential, arbitration can help keep that information private.

4 – Put Everything in Writing

Brand new start-ups often conduct themselves in informal meetings where agreements and decisions are made orally. Employment agreements, investments from family, and decisions about who is on the board of directors have often been the subject of litigation. You don’t want to have any ambiguity arising from oral agreements where different people have different interpretations of what was decided.

5 - Distinguish Between Important and Less Important Issues and Considerations

A lawyer typically wants to bill for as much work as they can. They also usually want to ensure that every bit of risk for a company they are advising is considered and allocated for. However, start-ups are not like large oil and gas companies with millions of dollars to spend on legal bills; they can’t pay to ensure that ten lawyers dot every “i” and cross every “t” on their contracts. Generally, the most important issues or risks in a contract or business plan should be considered and accounted for, but you may be unable to cover everything; that is just part of operating within a smaller budget. A good lawyer representing a start-up company will make some judgement calls about the most efficient ways to reduce risk for the start-up while not billing them for frivolous tasks; make sure you have one of those.