How Much Are the Yearly Legal Costs for a Startup?
No two startups are alike, but one thing remains clear: you have to spend money to make money. If you’ve got a great idea for a new company or business venture, you won’t be able to make a profit until you raise enough capital to get your business idea off the ground.
Besides "typical" startup costs, like the costs for property, employees, or prototype development, you must also consider the yearly legal costs for your startup. These include things like the cost of hiring a knowledgeable Maryland start-up attorney, document filing fees, and more.
Basic Filing/Reporting Fees
When you first start your company, you'll initially pay a filing fee to the Maryland Department of Assessments and Taxation. For example, if you create a limited liability company or LLC, you must file the company's Articles of Organization and pay a $100 fee. Fortunately, this fee is one-time only.
However, all companies have to file an Annual Report with the same Maryland organization. In addition to filing the report itself, which includes a breakdown of business activities and its status, you must also pay a $300 filing fee by mail.
Together, this totals $400 for your first year and $300 for every year after. The local Maryland jurisdiction also will assess an annual property tax based on the personal property used by the business as reported on the Annual Report.
Investing/Fundraising Fees
It's a good idea to hire a Maryland start-up attorney to ensure that your investment process goes smoothly. While the average cost of the fees for legal help can vary dramatically, expect to pay between $5000 and $10,000 at minimum for:
● A thorough look at your investment paperwork
● Attorney assistance for transferring intellectual property
● Assistance for IPO paperwork or seed funding paperwork
● And so on
The more complex the business, the higher the fees will be. It’s important not to skip these fees even if they seem expensive – ensuring that proper due diligence and document review are completed is vital to be able to rely on your investment funding and ensure that you retain control of your company as it grows.
But wait – aren’t these fees one-time only? Not exactly. If you’re making a startup from scratch, you must pay these fees over several years since no startup gets off the ground in under a few years. At each stage of expansion and fundraising/investing, you’ll need fresh eyes to go over documents and revise contracts.
Bottom line: expect to pay between $5000 and $15,000 each year for legal help in this area alone.
Related: 7 Big Legal Mistakes Start-Ups Make
Legal Fees for Company Operations
As your startup expands and you hire more employees, it’s wise to hire legal assistance to look over things like employee contracts, terms of use, privacy policies, and so on. All of this will easily cost you another few thousand dollars at minimum, with larger companies requiring more fees.
Naturally, you must also pay these fees regularly as you expand and grow. As your company gains more attention, you must ensure you stay within regulations for workers' safety, product review and safety, and so on.
Add another few thousand dollars of legal fees each year for these aspects.
Overall, yearly legal fees can get quite expensive for startups. That's one big reason why it's important to consider our Fractional General Counsel services. Contact our Maryland start-up lawyer today to learn more.