Can You Form a Corporation Without a Lawyer?
If you’ve ever Googled “how to start a corporation,” you’ve probably run into two extremes. One side says you absolutely must hire a lawyer or risk...
6 min read
Raising money for your business is exciting—and often overwhelming. Whether it’s a $10K check from your uncle or a $250K convertible note from an angel investor, you may wonder: Do I really need to hire a lawyer for this?
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
Technically, you don’t have to. There’s no law that says you can’t raise investment on your own. Founders make handshake deals and send DIY term sheets all the time.
But here’s the catch: raising investment—especially equity—puts you into securities territory, whether you realize it or not. That means you’re dealing with ownership rights, long-term obligations, and laws that don’t always go easy on “I didn’t know.”
This guide breaks down when it’s safe to DIY, when to loop in a lawyer, and how to avoid the fundraising mistakes that come back to haunt founders later.
The Short Answer: You Don’t Technically Need One—But You Probably Should
If you’re just starting conversations, building pitch decks, or gauging interest, you don’t need a lawyer yet. That early stage—where you’re building a “soft circle” of potential investors—is more about storytelling and strategy than paperwork.
But the moment someone wants to sign something—whether it’s a check, a note, or a stock agreement—you’re not just raising money. You’re issuing securities. And that comes with legal rules, tax implications, and real consequences if things aren’t structured properly.
What’s tricky is that investment deals often seem simple—especially with friends, family, or early believers. But once equity is on the table, the stakes jump fast. If you mess up an investor agreement now, you might spend 10x more fixing it later when you go out for a seed round.
What Type of Investment Are You Raising?
Before deciding whether to DIY or lawyer up, the first step is knowing what kind of investment you’re raising. Not all deals are created equal—what works for a small friends-and-family round won’t cut it for outside investors or venture capital.
Friends and Family Rounds
These are typically small, early investments from people who know you personally. They often trust you more than they understand the business. While they may not demand formal terms, these deals still fall under federal and state securities laws—even if you’re just raising $10,000.
Failing to document them properly or ignoring basic compliance can create big headaches down the line, especially if one of those early investors wants their money back—or claims they were promised equity you never recorded.
Angel Investors and Convertible Instruments
Angel investors are usually more sophisticated and expect clean documentation. SAFE (Simple Agreement for Future Equity) notes and convertible notes are common tools at this stage. They’re faster than issuing shares, but they still involve legal nuance, especially if you’re raising from multiple people or offering different deal terms.
Institutional or Venture Capital Funding
If you’re pitching VCs, you’ll absolutely need legal counsel. Institutional investors will bring their own lawyers, detailed term sheets, and complex requirements around board seats, liquidation preferences, and protective provisions.
At this level, DIY is off the table. You’ll need someone in your corner who understands how to read between the lines—and protect your long-term control and valuation.
Pro Tip – Securities Laws Apply—Even for Friends and Family
Many founders assume small, personal investments don’t need to follow legal rules. That’s a myth. Any time you accept money in exchange for future equity, you’re issuing a security. That means compliance, disclosures, and potentially filing a Form D with the SEC. Skipping those steps could come back to bite you—even years later.
When You Can Start Without a Lawyer
You don’t need a lawyer just to explore raising capital. In fact, the early stages of fundraising are often strategic, not legal. This is the phase where you’re building a pitch, getting feedback, and starting conversations with potential investors.
Safe to DIY at This Stage:
- Creating your pitch deck and practicing your narrative
- Having informal conversations with potential investors
- Gathering “soft commitments” (non-binding interest)
- Deciding what kind of investment vehicle you want to use (SAFE, note, equity, etc.)
- Using standardized documents—like the Y Combinator SAFE—for small early checks (usually under $50K)
As long as no money is changing hands and no one is signing anything, you can keep your legal costs at zero and focus on building momentum.
Example – Founder Raised $25K with a Standard SAFE
Nate, an early-stage SaaS founder, raised $25,000 from a local entrepreneur using Y Combinator’s SAFE agreement. He read through the terms himself, used a standardized version with no tweaks, and clearly explained the investment terms.
Because the investor was aligned, the amount was small, and the SAFE structure was standardized, the deal went through without needing a lawyer—though Nate still made a note to have the SAFE reviewed later before raising more.
Pro Tip – Standard Docs Are Safe Only If You Don’t Modify Them
SAFE notes and templates like them are designed to be startup-friendly—but only when used as-is. The moment you or your investor want to change the terms (“Can we add a payback clause?” or “What if I want a guaranteed exit?”), you’re in custom contract territory—and that’s when you need legal review.
When You Absolutely Need a Lawyer
The moment you start accepting money, signing agreements, or negotiating terms, you’re stepping into legal territory where mistakes can cost you equity, control, or future funding.
Even if the investor is a friend or seems “easygoing,” once money changes hands, expectations get serious—and vague promises or poorly written documents can lead to expensive misunderstandings.
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
You Need a Lawyer When:
- You’re drafting or negotiating a term sheet
- You’re issuing stock, creating new share classes, or offering equity with voting rights
- You’re raising money from multiple investors
- You’re collecting investments across state lines, triggering blue sky laws
- You’re filing required documents like a Form D with the SEC or similar state-level notices
- You’re managing ownership stakes and updating your cap table
These aren’t moments to cut corners. If anything’s ambiguous or undocumented, it can derail future investment rounds—or even open you up to personal liability.
Example – A Verbal Agreement Gone Wrong—Investor Sues for Equity
Two co-founders raised a quick $100K from a local angel investor over coffee and a handshake. The investor verbally agreed to convert the money into equity at a later round—but nothing was signed.
Years later, the company raised a priced round, and the investor came back—claiming he was entitled to 10% of the business based on that early deal. There was no paperwork to back up the founders’ version. The dispute dragged into arbitration, costing the startup tens of thousands—and nearly blowing the next round.
Pro Tip – One Lawyer Can Cover Multiple Investors
You don’t need to hire a new lawyer for each person writing a check. One attorney can draft standardized documents (like SAFEs or convertible notes), customize them once, and walk you through how to reuse them consistently. Think of it as a foundational investment that supports every deal after that.
Common Legal Documents Involved in Fundraising
Once you start raising money—especially from outside investors—you’ll need more than a signed check and a thank-you email. Investment isn’t just about cash changing hands. It’s about ownership, rights, and obligations—and all of that gets spelled out in legal documents.
Documents You’ll Likely Use
Here are the most common legal docs involved in startup fundraising:
- Term Sheet – A non-binding summary of key investment terms like valuation, ownership, voting rights, liquidation preferences, and board structure.
- SAFE or Convertible Note – Tools for early-stage investment that delay setting a valuation but still give investors the right to equity in the future.
- Stock Purchase Agreement (SPA) – Used when issuing stock directly to an investor in exchange for money.
- Operating Agreement or Bylaws Amendments – Updated to reflect the rights of new shareholders or preferred equity holders.
- Cap Table (Capitalization Table) – A live document tracking who owns what percentage of the company—critical for understanding dilution.
- Securities Filings – Like Form D (if you’re claiming a Regulation D exemption), and other state-specific notices to comply with securities laws.
Some of these documents can be templated—but most need tailoring. A lawyer’s job here isn’t just to write the docs. It’s to spot landmines that might look harmless now but could blow up when you’re negotiating your next round.
Pro Tip – A Lawyer Can Also Help You Say No to Bad Deals
Founders often think of lawyers as blockers. In reality, the right attorney helps you negotiate better terms, protect your cap table, and avoid clauses that give away too much control. It’s not just about legality—it’s about leverage. A lawyer can help you avoid “looks good now, regret it later” investment terms.
Final Verdict: DIY or Lawyer for Raising Investment?
You don’t need a lawyer just to start raising money. You can build your deck, pitch investors, and collect soft interest without spending a dime on legal fees. But the moment you accept money—or promise equity—you’re entering a legal zone where small mistakes have big consequences.
A lawyer doesn’t just protect you from lawsuits. They protect your equity, your cap table, and your ability to raise money in the future. Getting the legal side right once can save you thousands—and possibly your business—later.
Quick Decision Framework
- Talking, pitching, exploring? → DIY is fine
- Using standard SAFE/note for early checks? → Safe to DIY, if unmodified
- Issuing stock, negotiating terms, or raising from multiple/institutional investors? → Lawyer up
Think of legal help in fundraising as a scaling tool—you don’t always need it right away, but you’ll absolutely want it before the stakes get high.
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
Can You Write a Contract Without a Lawyer?
It’s one of the most common legal questions business owners ask—and for good reason. Hiring a lawyer to draft every single contract can get expensive...
Do You Need a Lawyer to Draft a Service Agreement?
If you provide services—whether you’re a freelancer, consultant, or agency—chances are you’ve either used or signed a service agreement. And you may...