Before creating your startup, you should be sure to get the legal structure of your business in an optimal state. Ensuring you have a strong legal foundation is one of the keys to a successful business startup.

Venture capitalists and solicitors involved in startups often come across many legal mistakes made by startup companies and entrepreneurs, which hampers the startup’s ability to succeed and scale.

A skilled legal professional will advise on the following, and other elements, involved with your startup:

Be clear on the deal with your co-founders

The legal brief should have clear details and set out a concise deal between all co-founders to prevent enormous problems in the future.

Issues such as those listed below should be sorted out.

  • Percentage of shares for each co-founder
  • Co-founders' roles and responsibilities
  • What happens to a co-founder's shares if s/he leaves the company
  • Time and financial investments for each co-founder
  • How a potential sale of the business would be handled
  • Overall goal and vision for the startup etc.

Start the business with the right identity

Your solicitor should help in making the decision on the legal identity of your startup. There are different legal forms your business could take and these include:

  • Sole proprietorships
  • Partnerships
  • Limited company
  • Corporation

These different legal forms of businesses have their pros and cons which range from taxes (high or low), getting loans, dealing with company liabilities and other matters.

It is usually suggested that you start your business as either a corporation or a limited liability company, especially if you are looking to scale up your business from the outset. Sole proprietorships and partnerships could be later converted to a corporation, or other legal entity to allow for growth. Converting the legal identity of your startup at a later date, however, would incur a cost.

Set up a contract for your business

A large majority of companies have a standard form contract when dealing with clients/customers, and your business should too.

There is no "standard" form per se. An experienced solicitor experienced in commercial law should help with the drafting. It’s essential that the final draft should include a clause on how potential disputes would be resolved.

Comply with the law when issuing stock to angels, family and friends

If you form a corporation or limited partnership, the sales of stocks to interested parties i.e. co-founder and/or investors would be subject to the country’s tax laws.

You should ensure that your business complies with these laws to avoid heavy financial penalties which could potentially cripple your startup.

Document employment

It’s also important to ensure that documentation is created and kept of your startup’s employment policy and contracts are signed by every employee you hire. It is a good idea to have a prepared core group of employment documents to be signed by your company's employees. An employee contract of employment and non-disclosure agreement are the basic documents you’ll need every employee to sign.

When you start your business, spend some time with a solicitor who is experienced in working with ambitious startups. It will be a wise investment.

Augustus Cullen Law has a dedicated commercial law team who is vastly experienced in all forms of commercial law. Contact us to chat about how we can help your startup.


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