Feb 21 2007

Should A Company Use A Founder’s Spouse As Legal Counsel?

Question: One of our founders (not the majority shareholder) has a wife who is partner at a law firm with great VC connections. We’re setting up as a C-corp, and the question is, would it be dangerous to let our partner’s wife’s firm handle our legal issues? On the one hand, they would definitely keep the company’s interests firmly in mind and do their best to make sure we’re successful. On the other hand, the paranoid part of me is worried of bias towards the husband to the point of detriment of us other founders.

Our Take: Listen to your paranoia. What seems like a situation, today, where everyone’s interests are aligned, may not be the case down the road. What if you and your co-founder disagree down the road? You as majority shareholder probably have the right to remove this person, but do you really want to speak to his wife in order to execute the termination?

Beside this one obvious potential conflict (and trust us, there are many others), it’s never a good idea for a lawyer, doctor or other professional to “treat” their family members. Company counsel is to represent the company, not the husband and it’s hard to be objective when it’s family.