Comparing Startup Legal Support: Ways to Engage Counsel and LegalAgent's Scope of Support

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

The closing date for a financing has been set, and negotiations on the investment agreement and shareholders' agreement have begun. In the same week, you need to explain stock options to a candidate you are recruiting, and a major customer sends over its own form of contract. At some point, a startup's legal work changes in character, from one-off legal consultations to managing overlapping deadlines in parallel.

At this stage, companies start weighing external options, such as engaging counsel on a per-matter basis or under a retainer, against hiring in-house legal staff. Neither is always better than the other. The right combination changes depending on the company's stage of growth, how continuous the matters are, and the time and resources it can devote to hiring.

Choosing by Stage of Growth

In the founding period, when matters arise sporadically, such as share arrangements among co-founders, the first service agreements and the preparation of terms of use, per-matter engagements are usually sufficient. What you should prioritize at this stage are matters that are hard to fix later, such as the founders' agreement, ownership of intellectual property and the procedures for issuing shares. Whether to fix a day-to-day point of contact from the outset can be decided while watching how actual transactions and hiring progress.

Once contracting with customers and hiring become routine, and you find yourself explaining the same business background to attorneys again and again, it is a good time to consider a retainer or legal outsourcing. If you decide based only on the number of consultations, you may overlook the revision work that arises internally after a contract review is completed, and the manual effort needed to explain matters to business teams. Including the format of the deliverables you need and the response deadlines in the contract terms makes it easier to compare the options.

As a company moves from seed to Series A, day-to-day transactional legal work and financing legal work proceed side by side. Even if you engage outside counsel only for negotiating the investment agreement, if the minutes of shareholders' meetings and board of directors' meetings and the registration documents are not in order, then depending on the extent of the deficiencies, corrective action or the execution of additional documents may become conditions precedent to closing, which can delay the schedule. If the attorney handling the financing and the contact for day-to-day legal work are different, it is important to match the investment agreement schedule against the deadlines for day-to-day transactions and to designate an internal person who oversees and manages the whole picture.

Even when you engage outside attorneys, some facts can only be grasped internally. Records such as who led past share issuances, what background was explained to the board of directors, which materials were disclosed to investors, and how stock options were presented to recruiting candidates must be compiled internally. If you designate one person as the contact for external matters and always keep key documents such as the shareholder register, articles of incorporation, minutes and commercial register up to date, you can reduce the burden of gathering materials from scratch for the next financing.

From Series A onward, for a company where legal consultations from business teams and corporate procedures keep increasing and where there is a realistic prospect of hiring someone who fits, in-house hiring becomes a strong option. This is because it places within the company a role that sits between the business teams, management and outside attorneys and decides the priority of tasks. That said, there is no need to decide uniformly whether to hire based solely on the financing stage. A division of roles in which routine contract processing is left to external providers and the in-house person concentrates on internal judgment calls and difficult, important matters can also work well.

If your product is in a field subject to legal regulation, such as finance, healthcare or human resources, there are situations where a continuous consultation system is needed even if the number of contracts is small. Checking the specifications of a new feature, advertising wording or data collection methods just before launch can lead to rework on specifications whose development is already finished. Whether legal becomes involved at the planning stage, at contracting or before release is also a factor in choosing the form of engagement.

Four Legal Structures

A per-matter engagement is a form in which you engage an attorney for each specific matter, such as a financing, preparing terms of use or handling an individual dispute. It is easy to delimit the scope and cost on a matter-by-matter basis, and it suits the early founding period and other times when legal work does not arise continuously. However, as the number of matters grows, each engagement requires explaining the business background, conflict checks and obtaining a quote, and it tends to take time before work can begin.

A retainer is a form that secures a continuous point of contact for consultations. Its advantage is that you can obtain advice from an attorney who understands your past consultations and your company's circumstances. However, the consultation hours included in the monthly fee, the number of contract reviews, the extent of attendance at internal meetings and so on are designed differently depending on the firm.

Legal outsourcing is a form in which outside attorneys or a specialist team continuously handle part of the day-to-day legal work. When outsourcing to a provider other than attorneys, do not judge by the name alone; check whether the actual services stay within the bounds of Article 72 of the Attorney Act and other rules. Some arrangements go beyond responding to individual consultations to cover intake from business teams, revising contracts and building up a history of matters. Its distinctive feature is that it can ease the burden on administrative departments and one-person legal teams while building a legal function even before a dedicated person is hired.

In-house legal is a form in which a legal staff member is hired as the company's own employee. Because that person participates in internal meetings day to day, it becomes easier to move matters forward with a first-hand sense of the business's progress and priorities. On the other hand, it is difficult for one person to cover every area of law, so in highly specialized areas such as financings, labor disputes and M&A, consider working with outside attorneys depending on the person's experience and the matter.

Comparison item	Per-matter engagement	Retainer	Legal outsourcing	In-house legal
Contract unit	Per matter	Ongoing monthly contract	Ongoing contract with a monthly fee, matter quota or scope of services	Employment contract
Getting started	Quote and order for each matter	Consult the retained contact	Request directly through the internal intake route	Started internally according to priority
Day-to-day work	Limited to the engaged matter	Consultations and matters set out in the contract	Continuous handling of agreed legal work	Broad coverage as internal work
Business understanding	Matter by matter	Deepens as consultations accumulate	Day-to-day matters and internal standards shared continuously	Continuous access to internal information
Cost	Varies with matters arising	Monthly fee plus individual fees	Designed around a monthly fee or workload	Salary, recruiting costs, social insurance, training costs, etc.
Specialized matters	Easy to choose an attorney in the field	Depends on the firm's areas of expertise	Shared with specialists inside and outside the team	Additional external engagement depending on expertise and internal structure

The Scope of LegalAgent's Support for Startups

At LegalAgent, we set the scope of support to match the company's stage of growth, from capital policy at founding to J-KISS and Series A investment agreements and procedures for shareholders' meetings and the board of directors. We go beyond reviewing financing agreements and connect seamlessly through to checking the corporate decisions and closing documents needed to put the investment terms into effect.

Company stage	LegalAgent's main support
Founding	Capital policy, founding shareholders' agreements, business legal work such as terms of use
Seed	J-KISS, investment agreements, preferred shares, questions from investors
Series A	Investment agreements and shareholders' agreements, class shares, minutes of shareholders' meetings and board of directors' meetings
Growth	Stock options, governance, a legal structure in view of IPO preparation

When draft agreements or questions arrive from investors, our standard is to respond within one business day as a rule, and in urgent situations such as immediately before closing, we also respond on the same day depending on the circumstances. Our scope of support goes beyond simply revising the provisions of a contract to include preparing the resolutions and minutes the company needs and checking documents for the registration application.

Our fees are based on fixed fees, and for each company we define the scope of day-to-day legal work entrusted on an ongoing basis and the scope of matters such as financings and stock option issuances requested individually. We can act as your external legal contact before you hire in-house staff, and after hiring, we can flexibly rearrange the division of roles between day-to-day matters and specialized matters.

Contract Terms to Include in Your Comparison Table

Even at the same monthly fee, a simple comparison is not possible if the work included in the scope of services differs. When outsourcing startup legal work, line up the following items for each candidate provider and proceed with your evaluation.

Contract term	What to check
Point of contact	Only management and the administrative department, or can business teams consult directly
Contract work	Only reviewing provisions, or does it include preparing revisions in Word and comments to the counterparty
Financing	How far it covers term sheets, investment agreements, shareholders' agreements, minutes and registration materials
Corporate	Handling of shareholders' meetings, the board of directors, stock options and internal rules
Response deadlines	Typical turnaround and the policy for urgent matters before closing
Matter management	Where consultation history, internal decision criteria and past revision policies are kept
Excluded services	Whether litigation, patent applications, tax filings, registration applications, etc. are within the contract scope, or whether coordination with or division of work among other professionals is needed

What is often overlooked in comparisons is the work that arises internally before and after each request. If your internal staff must gather background materials every time, translate the outside attorney's answers into plain terms for the business teams and reflect revisions in the Word file of the contract, that work remains in-house, so compare it together with the cost of legal consultations. It is important to confirm at the contracting stage in what state you will hand over requests and in what form you will receive the deliverables. In addition, for matters such as commercial registration and tax filings, whether they are included in the contracted services or divided with other licensed professionals is determined matter by matter, taking into account the scope that attorneys can handle themselves under the Attorney Act and related laws and regulations.

The handover arrangements when the person in charge changes are also something to check. The full picture of capital policy and the history of agreements with investors cannot be grasped from individual contract documents alone. Confirm whether the articles of incorporation, shareholders' agreements, past minutes and the history of stock option issuances can be shared within the responsible team, and whether organized materials and a list of issues will be returned to the company when the support ends.

Final decision-making authority in legal matters rests with the company. Even if outside professionals prepare proposed contract revisions, it is management and internal approvers who take on business risks such as price, delivery dates and investment terms and make the decision. By making clear who presents the legal options, who makes the business decision and who returns the contract to the counterparty, you can prevent the ambiguity of responsibility that comes with outsourcing.

Factors for Deciding Between Hiring and External Support

One situation in which in-house hiring should be considered first is where there is no one internally to allocate the priority of matters and legal issues are inseparably tied to management decisions. Work such as continuously participating in the board of directors, weighing multiple business risks against one another and properly managing outside professionals is especially worth having a dedicated internal person handle.

External support, on the other hand, suits cases where the outline of the work needed is clear but you cannot wait for a hiring decision, or where the workload varies greatly over time. In a company where the workload is concentrated only around financings, trying to match the peak with fixed headcount alone creates a gap with the normal workload. It is also a reasonable approach to bring in an external legal team at first and then rearrange the roles between internal and external resources after a dedicated person is hired.

There is no need to think of it as a binary choice between building the function internally and outsourcing it. There are arrangements in which an in-house person coordinates intake of internal consultations and confirmations with approvers while outside attorneys handle contract reviews and specialized matters, and arrangements in which outside counsel handles difficult issues while legal outsourcing handles routine contract processing. Separating matter intake, legal advice and internal decision-making and assigning someone to each makes the locus of responsibility clearer.

If you choose to hire, separately estimate the time it will take for the person to join and the scope of work that person can handle alone after joining. If you use external support as a bridge until hiring, include in the scope of services the keeping of records such as a matter log, contract templates and review standards so that they can be handed over to the future in-house person. If you plan to continue using external support after hiring, decide in advance the criteria for allocating matters and the budget allocation to avoid duplicate consultations.

If you would like to consult us about a financing, please share your current articles of incorporation, shareholder register and the proposed terms presented by investors. If you are considering support that includes day-to-day legal work, we will also check your frequently used contract types, your internal point of contact for consultations and your preferred response deadlines, and adjust the content of our support depending on whether it focuses on financing or continuously covers contract review and the running of corporate bodies. To confirm the scope of support in concrete terms, please see LegalAgent's Startup Legal and Fundraising Support, and to review the issues at each stage of growth, please see An Overview of Startup Legal Work.

Frequently asked questions

When should a startup retain outside counsel?

One benchmark is the stage at which customer contracts and hiring become ongoing and you find yourself repeating the same background explanation across multiple matters. Check not only the number of consultations but also whether you will continuously need support extending to contract revisions, internal explanations and financing procedures.

If we hire in-house legal staff, will we no longer need outside attorneys?

Because it is difficult for one legal staff member to handle every area, working alongside outside attorneys continues for financings, intellectual property, labor, M&A, disputes and similar areas. There is also a division of roles in which the in-house side holds priorities and final judgment, while the outside side handles routine processing and specialized matters.

How should we choose between per-matter engagements and legal outsourcing?

Per-matter engagements are easy to use in the founding stage, when matters arise sporadically, whereas legal outsourcing becomes an option once routine contracts and consultations become continuous and you need everything from intake and responses to history management.

How much of a startup's legal work can we ask LegalAgent to handle?

We handle everything from capital policy and shareholders' agreements at founding through J-KISS, investment agreements, preferred shares, stock options, minutes of shareholders' meetings and board of directors meetings, and checking the documents needed for registration applications.