Two friends decide to start a company together. They call a lawyer, that lawyer forms the entity, and everyone assumes they’re all on the same team. Often that’s fine. But a question worth asking early is a simple one: who does the lawyer actually represent?
This comes up more than people expect, especially when one founder had already retained a lawyer individually (say, to review an equity issuance or negotiate a personal stake) before the co-founder came into the picture. At that point, the attorney has to pause and ask the client directly: do you want me to keep representing you personally, or would you rather I represent the new company once it’s formed? The two paths lead to different places, and it’s worth understanding both before signing on.
Option 1: Individual Representation
Here, the lawyer represents one founder only. That means advising specifically on that person’s interests and negotiating the company’s organizational documents from their side of the table: ownership percentages, management rights, vesting schedules, compensation, transfer restrictions, buyout provisions, and everything else that governs the relationship between the founders.
The tradeoff is that the lawyer can’t also represent the other founder or the company itself. The other founder needs their own counsel, and the company may eventually need separate counsel of its own. That usually means more legal fees spread across more advisors, and it can make the formation process feel more like a negotiation between two sides than a collaborative launch.
Option 2: New Company Representation
Alternatively, the lawyer represents the entity being formed. In this setup, the attorney prepares the formation documents as counsel to the company itself, not to either founder personally. This is often the more efficient route when the founders are broadly aligned on the big-picture terms and just need the paperwork built correctly.
The catch: the lawyer represents the company, not either individual. That means the attorney can explain what the documents say and advise on what’s in the company’s best interest, but cannot advocate for one founder over the other. And if the founders later have a falling-out (a dispute over equity, control, or an exit), the firm stays on as company counsel and can’t step in to represent either founder personally in that fight.
Why This Matters Before You Sign Anything
Neither approach is universally “better.” Entity representation tends to be the more practical and cost-effective choice when founders are genuinely aligned on the fundamentals. But it comes with a real limitation: the lawyer’s loyalty runs to the business, not to you individually, even if you’re the one who called the firm first. If there’s any meaningful daylight between what you and your co-founder want (on equity split, control, or what happens if one of you leaves), that’s worth resolving, or at least understanding, before you decide who the lawyer represents.
The best time to have this conversation is before formation documents are drafted, not after a disagreement surfaces. A short conversation about representation up front can save a much harder one later.
This post discusses general principles and does not constitute legal advice. Rules governing conflicts of interest and entity representation vary by jurisdiction and by the facts of each situation. Anyone forming a business with a partner should discuss their specific circumstances with an attorney.
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