WHY HIRE A STARTUP LAWYER?

why hire a start up legal expert

As a startup, you have made the big decision to set up a business, but you may not know the legal steps required to build a successful platform from which to launch. While every business is unique and comes with its own set of problems and opportunities, working alongside a savvy Startup lawyer can help you avoid stressful legal challenges down the track. It also frees you to focus on the development of the business, building your team and not spending time trying to grasp the intricacies of the law.

In this post we outline a few of the legal issues a startup may face. These are matters that a startup lawyer is adequately equipped to handle on your behalf. It is by no means an in-depth list but we have covered some of the important legal requirements faced by a startup.

As if often the case, when launching a startup, the owner’s energy is directed entirely on taking the company’s product or service from an idea into the marketplace. And although it is important to get your company underway as soon as possible, be sure to think through the legal ramifications of your business strategy so that the company is set up for a bright future.

Incorporating your Startup

When you incorporate a business, a legal separation is made between the individual entrepreneur/s and the business itself. This incorporation protects the individual from taking on personal liability for any debts or liabilities which the business may incur.

You could think of your organisation as an independent vessel which carries out various aspects of business. It holds trademarks and intellectual property, employs, hires contractors, works with suppliers, pays GST, and  enters into different contracts at various stages of the development cycle. It is the organisation itself which is responsible for conducting all transactions relating to the business, not the individual business owners.

Financing your Business Startup

As a startup, a day may come when you seek outside investors. When you do, you will want to be sure that you do not get outmuscled in the process, and secure for your company the best possible deal on the best possible terms – a win-win for you both.

Seeking outside investors come with their own set of legal issues, financial options such as personal investments, seed investors, crowd funding, loans and venture capitalists to name a few. Having a lawyer check over the “details” of an agreement or review the terms and conditions an investor places on the agreement will highlight issues, pitfalls or any legal obligations that you may not pick up on. Issues like, organising the investment as company equity or debt, what valuation to apply, the vesting schedule, and price adjustments at closing must also be taken into consideration.

Make sure you negotiate the amount of control your investors hold within the business. This should be done as early as possible, detailing the board structure through voting rights, outlining which transactions can be approved by your investor/s and deciding if they hold a stake in any future rounds of funding. A commercial lawyer, who specialises in startups, will be familiar with these investor-side issues. Their experience will help you anticipate many of the pitfalls you might have in closing a deal.

Employee & Contractor Agreements

As your startup develops, there will be a need to hire staff and to take on contractors and subcontractors to deal with various aspects of this development.

Drafting an employee agreement before the hiring process begins will help to develop the terms of your employee’s employment as well as the conditions set out for all staff within the company. It is important to consider a few things when taking on new employees which can be outlined within the employment agreement. These include; the assignment of any IP created by the employee, a non-compete clause, or non-disclosure agreement for confidential information held by the company.

Remember that there are rigorous compensation requirements, like the minimum wage laws, which you are legally obliged to comply with. Depending on the circumstances, these requirements even extend to unpaid internships.

Companies often misclassify employees as independent contractors, making it important to obtain professional advice when hiring a new talent or contractors to work within the business. A startup lawyer can help you navigate the do’s, don’ts, conditions and restrictions of these contracts.

Hire a startup lawyer in Bondi

Protecting your Intellectual Property

Protecting the core of your business is fundamental to maintaining a competitive edge as a startup. As lawyers, we are immersed into the fabric of many new startups, navigating innovative ideas and breakthrough inventions. If an invention is patentable, then an Intellectual Property Lawyer can file the relevant paperwork for your application to be processed, the earlier in the process, the safer your IP will be. Note that publicly disclosed inventions lose their patentability in Australia and other countries.

Another reason to submit your patent application early is to ensure your competition does not file a patent for a similar invention before you do. It is prudent to enter an NDA with any business partners, individuals, employees, business advisors, contractors or organisations that you disclose your concept/s to. For further information about protecting your intellectual property, check out our blog post, Protect Yourself Before You Hurt Yourself.

Protecting your Brand’s Identity

Building a brand name does not come easy, and it arises on the back of a lot of blood, sweat and tears. So, trade marking your brand name is a great way to protect your brand. It can be a distinct symbol, colour, hashtag, song, stage name, or a specific design and qualifies as a trade mark that you can register. This registration is proof that you have ownership of the trade mark, and allows you to bring a claim in court. There are several factors on which a successful trade mark application depends, and a good trade mark lawyer will know what you will need to push this application through. If your trade mark is rejected, it will probably be too like another trade mark which covers similar goods or services. It is possible to rectify this objection by removing or omitting the infringing description.

Before you name your business and come up with a brand identity, it would be a good idea to meet with your lawyer to ensure that you can easily protect and register it as a trade mark. They will probably advise you to register the name of your brand as a wordmark, as this encompasses the use of the word regardless of the font, colour, size or configuration used. You can also register the logo as a trade mark, however this limits the protection of your trade mark to the design or style used in the logo.

Partnership/Shareholders Agreements

If your startup has more than one founder, a Partnership or Shareholder Agreement is imperative. A mistake that startups often make, is to put off entering into a Partnership Agreement. It is hard to know when your ideas or vision for the company will deviate from that of the other founding members, so having a solution in place before a disagreement or split happens is a good strategy to implement early on. This will help resolve any possible conflicts that arise between the Partners or Co-founders in the future. It can also help minimise the cost of expensive litigation cases should a business relationship break down at a later stage.

There are a few things a startup should consider included within the Partnership Agreement so that they do not become issues in the future; financial obligations, profit sharing, decision-making, dividing responsibilities, buyout agreements, equity splits, set up of bank accounts, sale of the business, amongst others.

Issuing Company Shares

Once incorporation has been implemented, a decision to distribute shares among the co-founders or allow employees to invest in share options, can be made. If the company has more than one founding member, it is in the interest of the organisation to make sure that members contribute into the business. This is where a startup lawyer can help, through devising a vesting schedule so that the shares vest in co-founders only once the time allocated in the schedule matures, or after they have met the given conditions of contributions to the business. It safeguards the company, and allows the shares to vest only in those who remain in the business and contribute to its development. Any unvested shares, can be re-assigned later to new members that join the company.

In conclusion, start considering the legalities of your business as early as possible! It will save you a lot of time, money and stress and allow you to set a good foundation for growth.

Lazarus Legal are here to help you RISE ABOVE… the “Crowd”. Our startup lawyers are available to help you with all your startup’s legal essentials. Speak with one of the Lazarus Legal crew today on 02 8644 6000.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *