The payment of legal fees by issuing stock or other equity to the law firm in lieu of cash became popular in the late 1990s with Silicon Valley startups and has gone in and out of fashion since then.  The appeal of the structure, particularly with startups, is obvious.  Before these companies start generating revenue, the cost of capital is high, so it may be better to hold off on raising funds to pay service providers like attorneys and instead compensate them, at least initially, with equity.  It is also common now to have hybrid structures where, for example, the law firm is granted a small piece of equity issued in exchange for the firm’s agreement to discount fees and defer their payment for a period.
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