Should I use a legal template or a lawyer’s services for our legal documents? What are the costs? And when should I establish a company?
Question from October 2024
We developed a B2C dating app and we want to do closed beta testing with some initial users. Before doing so, I first want to understand if it’s okay to use Terms of Use and Privacy Policy documents that I took from a legal document generator website (or any other legal template for that matter), or if it’s better to use a lawyer? I’d also like to know the costs of these documents.
Background: we haven’t incorporated as a company yet, we’re private individuals and we did the development ourselves. In the first stage, users won’t pay, and we don’t have any income.
Thanks in advance!
Answers:
- Generated documents vs. Purchased Legal Templates vs. Using a Lawyer:
Using a lawyer: Generally, Terms of Use, Privacy Policies and legal templates which are drafted by a lawyer (and assuming he or she specialize in that field) will be a lot more tailored to your specific needs. A professional lawyer will first meet with you and ask you about you, the team, the target audience and the venture and then adapt the documents based on the information you provide.
Legal Templates: The worst option is to use a template that you found somewhere or downloaded from a website that doesn’t frequently update them. The reason being that it is not tailored to your needs, it may no longer be up to date and you won’t know what to change.
Generated documents: the quality of the template documents from document generating websites depends on the website. Some websites provide a ‘dry’ template – meaning you get a set/fixed document that doesn’t change (except for maybe your company name and email). In this case, the document will be very basic, and you shouldn’t expect a very high level of legal coverage.
On other websites (dynamic document generators), on which you’re asked various questions before it generates the document, you will get a more customized version. In this case, the documents are relatively reasonable in their legal coverage – although even then, don’t expect them to give you 100% protection or even 95% because they’re still machine-generated and don’t always ‘know’ what to ask you.
Additionally, the higher-quality document generating websites usually require a monthly payment for use of the legal templates, which creates dependency on that website. So even though it may seem cheaper than a lawyer at first, overtime it might work out the same, if not more. That said, the advantage of using (good) websites with dynamic documents is that they sometimes update their templates when a laws changes, and then you should be able to get an updated version without paying for changes. Bottom line: if you’re testing the app with just a few (not more), and assuming you establish a company (to give you more protection), then most entrepreneurs will make do with the dynamic template version as a start, and once you see that the startup has potential, then you go to a startup lawyer [As a lawyer I can’t and don’t recommend doing this as a lawyer is always preferable, but if you don’t have the money, it’s better than nothing]
2. Prices of documents:
Asking how much for a document is a bit like asking how much a car costs. 😊 The answer depends on the type of startup, the industry, the country you’re focusing on, the information you collect, the features of the app, whether it’s a large law firm or a private lawyer, the location of the lawyer and many other criteria. But just to give you a ballpark figure: IF the lawyer is in Israel, then it’s between $800 (considered very low) to about $2,500 + VAT for each document, but can also go up to $3k or $4k at large firms or if the venture is complex. Here are estimated prices for other documents that startups need.
For US lawyers, double the amounts.
3. When should I Setup a Company?
Based on what you described in your question – meaning that there are a few co-founders, you’ve already created an initial version (meaning that you have intellectual property – IP) and that you want to do a pilot (beta testing), it would have been better if you had already established a company. Establishing the company helps with protecting the IP (meaning the IP belongs to the company and not the entrepreneurs), can reduce unnecessary tax costs when transferring IP, and perhaps most importantly: protects you from personal liability. Therefore, it’s important to establish the company before launching the beta testing. The only consideration I can think of for waiting another two months is that if you establish now (October) you’ll pay registration fees and need to file reports for both 2024 and 2025, but I don’t think this consideration justifies the risks of waiting.
4. Intellectual Property.
You also need to consider the intellectual property aspect. As long as you haven’t signed a founders’ agreement, the intellectual property belongs to whoever developed it, and not to the company or all entrepreneurs. This is an important point to consider if you haven’t arranged it.
Need help with Terms of Use or Privacy Policy? Looking for a lawyer for your startup? Feel free to contact us. And good luck! 😊
