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Ethics for Business Lawyers Representing Start-Up Companies

Posted: 26 Jun 2011  

Therese H. Maynard

Loyola Law School Los Angeles

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Date Written: June 23, 2011


Starting in the 1990’s, it became an increasingly common practice for lawyers – particularly Silicon Valley lawyers – to take an equity investment in the business ventures of their new clients. While the practice lulled somewhat in the aftermath of the burst of the bubble, it is becoming relevant again as the market for stocks of high-tech companies has been gaining strength in the wake of the economic recovery from the recent Great Recession. This Essay explores the ethical issues as well as the general business considerations that arise in connection with the practice of taking stock in lieu of payment of legal fees in cash, which has long been the traditional billing practice for legal services. For reasons that are described in detail in this Essay, many academics and experienced venture capital lawyers believe that taking stock in a client presents significant potential to strengthen the lawyer’s relationship with the new business client. At the other end of the spectrum, there are others within the legal community (both academics and practicing lawyers) who just as strongly believe that these equity investment arrangements significantly undermine time-honored ideals that have long guided the legal profession in determining how corporate lawyers should go about fulfilling the ethical and fiduciary obligations that they owe to their business clients. This Essay describes the advantages and disadvantages of these equity fee arrangements in order to address the fundamental public policy concerns presented by the growing practice of taking stock in payment of legal fees – namely, whether this practice serves the client’s best interests, and separately, whether these arrangements also serve the best interests of the legal profession.

Suggested Citation

Maynard, Therese H., Ethics for Business Lawyers Representing Start-Up Companies (June 23, 2011). Wake Forest Journal of Business and Intellectual Property Law, Forthcoming ; Loyola-LA Legal Studies Paper No. 2011-23. Available at SSRN:

Therese H. Maynard (Contact Author)

Loyola Law School Los Angeles ( email )

919 Albany Street
Los Angeles, CA 90015-1211
United States
213- 736-1155 (Phone)
213-380-3769 (Fax)

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