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 pursue you personally for those debts.

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

  • decision making

  • conflict of interest (if any of you have other jobs that may create a conflict of interest)

  • Restraints e.g. not working for competitors

  • Confidentiality

  • Intellecutal 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

  • Financial information

  • Financing the company

  • Transfer and registration of shares

  • Tag along and drag along rights

  • Intellectual property

  • Confidential information

  • Non-competition

  • 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, flexi-days (where applicable).

  • Worker obligations

  • Expenses

  • Redundancy

  • Termination

  • 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.

Still unsure of what services you need ? Get in touch, we are glad to help.











 

 

 

About the Author

In October 2014 I founded Michael Law Group to make legal services accessible to startups that would otherwise DIY, rely on legacy contracts or go without.

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