Which legal services do I need first for my startup?

By Vivian Michael | Startup Contracts

Here are some tips to help you prioritise legal work for your startup.

Launching a startup can be overwhelming if you don’t know where to start particularly finding the time and cash to do everything at once.

The good news is, when it comes to the legal work for your startup, you don’t always have to prepare everything at once.

There are some essentials that you will need upfront and some non-essentials that can wait, here are our recommendations to help you best manage your time and efforts for legal work before and during your startup’s take off.

1. Your business structure

Deciding your structure is an important first step so let’s start here.

In terms of structure you have a choice of company, sole trader, partnership and trust in Australia.

Factors such as tax, setup costs and simplicity to operate and maintain the structure are big influencers for structure choice.

Why start with structure?

An important reason is business agreements that you decide to enter.

In particular, if you have chosen a company structure, then you will want to start entering into agreements as a company as soon as possible as opposed to as an individual.

Why?

A company is a separate legal entity with limited liability. This means, your company is liable for company debts and generally, creditors cannot chase you personally for those debts.

2. Founder's agreement

If you are working with others on your startup, then a co-founder’s agreement is useful.

So who is a founder?

A founder is an entrepreneur involved in starting the business. When working with other founder’s, you can set clear roles and expectations from the outset to minimise disputes.

So, what’s typically covered in a founder’s agreement?

  • Duties and responsibilities;
  • Resource contributions including repayment for personal contributions
  • Conflict of interest (If you have any other jobs that could create a conflict of interest)
  • Restraints e.g. not working for competitors
  • Confidentiality;
  • Intellectual property;
  • Mediation (for dispute resolution);
  • Variation (particularly important for role descriptions; this clause gives parties the flexibility to alter the founders agreement, for example, if different duties are required).

3. Shareholder's agreement

A shareholder agreement is important if you have allocated shares to other people such as co-founders and investors.

A shareholder agreement outlines the roles, rights and responsibilities of each shareholder and typically covers:


  • business and management of company;
  • financing the company;
  •  transfer registration of shares;
  • tag along and drag along rights;
  • intellectual property;
  • confidential information
  • non-compete; and
  • dispute resolution

4. Worker agreements

Depending on whether you bring on a contractor or employee, you may need a contractor agreement or an employment agreement drafted.

While a contract can be made verbally, it’s a good idea to have the key terms and conditions for engaging your workers in writing to avoid disputes about what was agreed.

Here’s what’s usually covered:

  • work classification - part-time/full-time/casual/contractor;
  • pay;
  • entitlements - leave, sick pay, flex-days (where applicable);
  • worker obligations;
  • expenses;
  • redundancy;
  • termination; and 
  • confidential information.

  • You can read more about contractors and employees here.

    While you can have these prepared in advance of hiring, it’s a good idea to get them drafted just before you engage a worker so you can have an up to date agreement.

    5. Stakeholder Agreements

    What if you are dealing with an established business that has their own terms and conditions?


    Established businesses that you work with may have their own terms and conditions; you can certainly have these reviewed by a lawyer before you accept them.

    And if you are considering or working with a business that is not willing to negotiate terms, tread with caution.

    Businesses that are not willing to behave reasonably from the outset could cause you headaches later, particularly if you need some flexibility later.

    Businesses that are not willing to behave reasonably from the outset could cause you headaches later, particularly if you need some flexibility later.

    Conclusion

    Phasing your legal work will not only help with your cash flow but will also help you save time providing instructions to a lawyer during the intense launch period when you have many other competing priorities.

    Do you need help from an Australian business lawyer for startups? Contact us today for help on info@michaellawgroup.com.au or 1300 478 278 Australia wide or on +61 2 9151 7233 from overseas. We are always glad to help.

     

     

     

    About the Author

    Vivian Michael is a lawyer and founder of Michael Law Group. Vivian's mission is to make quality business legal services accessible to startups that would otherwise DIY, rely on legacy contracts or go without.

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