The Role of Clerky in Startup Legal Needs

Clerky is a widely recognized online service designed to assist startups with legal paperwork, particularly for incorporation and post-incorporation tasks. While it offers a streamlined and cost-effective method for handling essential legal documents like articles of incorporation, bylaws, and equity agreements, there are several considerations to keep in mind. This article will delve into the capabilities and limitations of Clerky and explore whether it might be sufficient for your startup's needs.

Basic Needs and Early-Stage Startups

Clerky can effectively cover basic incorporation needs and aid in the creation of common post-incorporation documents, making it a suitable choice for many startups, especially those in the early stages of development. Its user-friendly interface and affordability are particularly appealing to entrepreneurs who are looking to keep legal expenses to a minimum.

Complex Situations and Additional Legal Advice

However, for startups with unique circumstances, such as multiple founders with varying equity arrangements, complex financing needs, or regulatory considerations, Clerky may not be sufficient. In these cases, it is advisable to seek additional legal advice or services beyond what Clerky offers to ensure compliance with all legal requirements.

Consider these points when deciding whether Clerky is appropriate for your startup:

Complexity of Your Business: If your business has intricate legal or regulatory requirements, you may need a more comprehensive legal service. Number of Founders and Equity Arrangements: Ensure that Clerky's services align with your specific equity structure and agreements. Regulatory Compliance: Verify that Clerky's templates and processes adhere to the specific legal requirements of your jurisdiction.

State-Specific Requirements and Ongoing Legal Needs

As your startup grows, you may require ongoing legal support for contracts, compliance, intellectual property, employment law, and more. Clerky is primarily focused on the initial setup and basic document creation. Consider whether you will need a lawyer for these areas to ensure comprehensive legal coverage as your business evolves.

In addition, ensure that Clerky's service meets the state-specific requirements of your jurisdiction, as laws can vary significantly. For instance, some states may have specific requirements for stock plans, share issuances, and confidentiality agreements.

Personal Experience: A Delaware Corporation in California

I recently worked with a client, a Delaware corporation doing business in California, which had used Clerky for its formation and post-formation services. My experience revealed several deficiencies that highlight the potential risks of relying solely on online services.

For this client:

25102o Exemption Filing: The client's stock plan exemption for 25102o had not been filed. Interestingly, the 25102o filing was presented as a hard copy rather than as instructions for online filing. 25102f Filing Absence: There was no 25102f filing or online instructions for the issuance of shares to the founder. Proprietary Information and Invention Agreement Ineffectiveness: The proprietary information and inventions agreement was predicated on the founder being an employee and receiving compensation, which was not the case for this client. I drafted a proprietary information and inventions agreement for founders based on their shareholder status, officer position, or both.

These deficiencies underscore the importance of thoroughness and accuracy in legal document preparation. By using an online service, you may pay less than you would for traditional legal representation but you do not have the guarantee that everything will be done completely and properly.

Conclusion and Important Considerations

In summary, Clerky can be a valuable tool for incorporating and managing basic legal documents for your startup. However, it is crucial to assess your specific circumstances and needs. If you have unique requirements or complex situations, it is advisable to seek additional legal guidance to ensure comprehensive and accurate legal coverage.

Remember, while online services offer convenience and cost-effectiveness, they cannot replace the expertise and thoroughness of a professional lawyer. Always verify the suitability of any online service you choose, and consider consulting with a licensed attorney if you encounter any uncertainties or complex legal requirements.