The $300 vs $3,000 Decision: When to DIY vs Hire a Lawyer
Business formation costs less than $300 DIY, but mistakes can cost thousands. Learn when to save money and when to invest in legal protection.
Tenicia Moulden, Esq.
The Entrepreneur's Counsel
Every entrepreneur faces this decision: spend $300 to DIY your legal needs, or invest $3,000+ in professional legal services. The answer isn't always obvious, but making the wrong choice can cost you everything.
When DIY Makes Sense ($300 Range)
Simple Business Formation
You can DIY if:
- Single owner LLC with no investors
- Standard business in low-liability industry
- No complex tax situations
- Using your home state's standard forms
DIY Cost: $50-$300 state filing fees + $50-$150 for online service
Basic Business Licenses
Most local business licenses are straightforward:
- City business license applications
- DBA (Doing Business As) filings
- Basic sales tax permits
- Standard professional licenses with clear requirements
Simple Contracts from Templates
When templates work:
- Standard NDAs for general use
- Basic service agreements under $5,000
- Simple invoice terms and conditions
- Standard privacy policies for websites
When You NEED a Lawyer ($3,000+ Range)
Complex Business Structures
Get professional help for:
- Multi-member LLCs with different ownership percentages
- Corporations with multiple share classes
- Any structure involving investors
- Cross-border business entities
- Holding company structures
Why: Mistakes in operating agreements or bylaws create disputes that cost $10,000+ to resolve.
Intellectual Property Protection
Never DIY:
- Trademark applications (beyond the most basic)
- Patent applications
- Complex copyright registrations
- IP licensing agreements
- Technology transfer agreements
The Risk: A rejected trademark application can prevent you from ever getting protection. Cost to fix: $5,000-$15,000.
Employment Matters
Always get legal help for:
- Employee handbooks
- Equity compensation plans
- Executive employment agreements
- Non-compete and non-solicitation agreements
- Termination situations
The Risk: Employment lawsuits average $75,000 to defend, even if you win.
Raising Capital
Never attempt without a lawyer:
- Any securities offerings
- Convertible notes
- SAFE agreements
- Series A or later rounds
- Crowdfunding campaigns (equity-based)
The Risk: Securities violations can result in criminal prosecution and millions in penalties.
The Hidden Costs of DIY
Case Study 1: The $300 LLC That Cost $50,000
Founder used LegalZoom for a two-member LLC. The generic operating agreement didn't address:
- What happens if one member stops working
- How to value the company for buyouts
- Decision-making deadlocks
Result: Bitter dispute, litigation, company dissolution.
Case Study 2: The DIY Trademark Disaster
Company filed their own trademark, described goods too narrowly. Competitor launched similar brand in adjacent category.
Result: No protection, rebrand cost $100,000+.
Case Study 3: The Template Contract Nightmare
Used online template for $50,000 service contract. Template didn't include:
- IP ownership clauses
- Proper limitation of liability
- Dispute resolution provisions
Result: Lost IP rights, unlimited liability exposure.
Smart Hybrid Approach
Start DIY, Then Get Review
Cost-effective strategy:
- Draft using quality templates
- Pay lawyer for 1-2 hour review
- Make recommended changes
- Have lawyer review final version
Cost: $500-$1,500 vs. $3,000+ for full drafting
Unbundled Legal Services
Buy only what you need:
- Document review: $500-$1,000
- Specific question consultation: $300-$500/hour
- Filing assistance: $500-$1,500
- Negotiation coaching: $500-$1,000/session
ROI Analysis: When Legal Fees Pay for Themselves
| Situation | DIY Risk | Legal Cost | ROI |
|---|---|---|---|
| Simple LLC | Low | $500 | Negative |
| Multi-member LLC | $50,000+ | $3,000 | 16x |
| Trademark | Brand loss | $2,500 | Infinite |
| Employment Agreement | $75,000+ | $2,000 | 37x |
| Investment Round | Criminal liability | $15,000 | Infinite |
Your Decision Framework
DIY if ALL of these are true:
- Standard, simple situation
- Low dollar amounts at risk
- No other parties involved
- Clear guidance available
- You can afford to be wrong
Hire a lawyer if ANY of these apply:
- Multiple parties involved
- Significant money at stake
- Intellectual property concerns
- Employment relationships
- Investment or securities
- You can't afford mistakes
The Bottom Line
The $300 vs. $3,000 decision isn't about what you can afford today – it's about what mistakes will cost tomorrow. Smart entrepreneurs view legal services as insurance: you invest a little now to avoid losing everything later.
Start with this rule: If failure costs more than 10x the legal fee, hire the lawyer. Your future self will thank you.