Startup Lawyers in Sydney

Do I need a lawyer to incorporate my startup?

No. You are not legally required to use a lawyer to register a company in Australia, and you can register directly with ASIC.

Registration is only one step, though. The decisions made alongside it have long-term consequences that a standard registration does not deal with: whether to adopt a constitution or rely on the replaceable rules in the Corporations Act 2001, how equity is split between founders, and how shareholder rights are documented.

ASIC describes a constitution as a contract between the company and its members, directors and secretary, and notes that you may need legal help to write one. Getting it right at the start usually costs far less than restructuring a company later.

How much do startup lawyers charge in Sydney?

Fees vary with the firm, the scope of the work and whether it is billed hourly or as a fixed fee, so it is worth asking for a written quote before any work starts.

At Lazarus Legal we quote fixed fees for our startup work. Company registration and formation is $1,000 to $1,200, and capital raising documents such as term sheets, convertible notes and SAFE agreements are $1,000 to $2,000 depending on complexity. You know the cost before we start, with no hourly billing. You can read more about startup lawyer fees.

What should be in my shareholders agreement?

A shareholders agreement is a private contract between the shareholders of a company. It sits alongside the constitution and sets out how the shareholders deal with each other in practice. For an Australian startup it should usually cover:

• Equity splits and share classes
• Vesting of founder shares, to protect the company if a founder leaves early
• Decision-making rights and voting thresholds for key decisions
• Pre-emptive rights, giving existing shareholders the first chance to buy new or transferred shares
• Drag-along and tag-along clauses, which set out how shareholders take part in a sale of the company
• Good leaver and bad leaver clauses, covering what happens to a founder's shares when they leave
• Dividend policy and the matters that need unanimous or special majority approval
• How disputes are resolved

Without a tailored agreement, founders are left relying on the constitution or the replaceable rules, which were not written with a multi-founder startup in mind.

What legal documents does a startup need in its first year?

It depends on your stage, but most early-stage companies should have these in place within their first twelve months:

• A company constitution adopted at registration, or a clear decision to rely on the replaceable rules
• A shareholders agreement covering equity, decision-making and founder exits
• IP assignment deeds so that intellectual property created by the founders, including work done before the company existed, is owned by the company
• Employment agreements that meet the Fair Work Act 2009 and any applicable award, and contractor agreements that reflect a genuine contracting arrangement
• Confidentiality agreements for anyone outside the business you share sensitive information with
• Website terms and, if the Privacy Act 1988 applies to your business, a privacy policy that meets the Australian Privacy Principles
• Any licences or registrations your industry requires

IP assignment deeds are the easiest to miss, and fixing ownership later, once a founder has left or an investor is doing due diligence, is harder and more expensive.

How do I set up an ESOP for my first hires?

An employee share option plan (ESOP) gives employees the right to acquire shares in the future, usually subject to vesting conditions and an exercise price.

The main question for most early-stage Australian companies is whether they qualify for the ATO's start-up concession. If they do, employees are not taxed upfront on the discount. Tax generally arises under capital gains tax when the shares are sold, and the 50% CGT discount can apply once the interest has been held for more than twelve months, counted from when the option was acquired.

To qualify, the company must be unlisted, incorporated for less than 10 years, an Australian resident with aggregated turnover of no more than $50 million, and employees must hold their interests for at least 3 years. Options must also have an exercise price at least equal to the market value of a share when they are granted.

Setting up an ESOP needs a formal plan document, vesting schedules, exercise prices and compliance with ASIC's employee share scheme rules and the ATO's annual reporting. Mistakes in the structure can leave employees with an unexpected tax bill, so it is not a document to template without advice.