How to prioritise your legal and accounting work for your startup
Updated: 7 December 2019
Read on for some ideas to help you prioritise and avoid startup overwhelm.
In a hurry? Jump ahead.
Accountant or lawyer first?
Either an accountant or lawyer can help you with initial advice about your business structure.
In fact, either an accountant or lawyer can help you to set up and register your business structure. You'll need that first, before you enter into any agreements.
In Australia you can choose from the sole trader, partnership, trust or company structure but we're not going to go into the difference between each here.
So, while a lawyer or accountant can help you setup your structure, only an accountant can give you tax or tax planning advice.
Some clients prefer a lawyer to set-up their structure and then also help with legals as they have one point of contact, but either way, you will need to setup your business structure first.
Next, what do you need to keep track of your financials?
Cloud based accounting software
Cloud software like xero or quickbooks is a terrific way to track your financials regularly.
These and other cloud providers usually have apps that you can use to complete your account coding from an iPhone or tablet and they provide user friendly reports that you can review as well.
Importantly, as a director you are ultimately responsible for how your company is run. This includes managing your financials. And delegating accounting work to an accountant is not an excuse.
You may need help with financial modelling.
This is especially important if you are going to pitch to investors. So you'll want to get your model ready before you present to an investor.
And as a confidence booster, you may want to practice your pitch beforehand, either with friends and family or in front of a mirror.
A financial model gives investors an idea of your startup's financial situation. For example, what investment you are seeking and what benefits the investors can expect to see.
And at a minimum, investors will want to know your business model, collaborators, founders and their qualifications, actual and projected revenue, a forecast and budget.
In Australia, you'll find that book keeper's may not be best suited for this task because its not a core speciality.
So, you should seek out the help of an accountant that provides modelling services.
Iv'e mentioned before that you should phase your legals to avoid overwhelm.
These are some other good reasons to phase your legals:
- Time to give instructions - yes, your lawyer needs to get your instructions, they cannot draft high-quality customised contracts without your input so you need to set time aside to provide these; and
- Cash flow - you can manage your cash flow by phasing your legal work.
The legal work you’ll need first will depend on whether you are working with others or if you are a solopreneur.
If you aren’t working with others, then your legal work focus should be legals to protect your business when dealing with the public. Below are some ideas for your essentials.
This is what terms usually cover:
1. Purchase process
7. Licence only (licence to use website, not a transfer of ownership).
1. Information collected
2. Use and disclosure of information3. How technology is used to collect information4. Marketing5. Keeping information safe6. Right to access information 7. EU resident rights 8. Disclosing information overseas (e.g. hosting, analytics, outsourcing etc)9. Complaints or concerns.
If you are entering into agreements for the supply of equipment, tools, software for your business and you are dealing with larger provider’s, they’ll likely have standard terms - you should always get these reviewed by a lawyer if you are unsure of anything.
As a solopreneur you can benefit from some cost savings; you won’t need a founder’s or shareholder agreement.
Working with others
Now, if you are supplying your offering with others, you may need a founder’s agreement, shareholder agreement, supplier agreement or collaboration agreement.
Here’s a description of each:
A founder's agreement outlines how you will work with a co-founder, IP ownership, confidentiality, resource contributions & reimbursement, work expectations, pay and termination process. It also can cover shares briefly but for shareholder rights, you’ll need a shareholder agreement
A shareholder agreement outlines shareholder rights, responsibilities, rights to transfer, access to company information, intellectual property and confidentiality.
Supplier agreements cover deliverables, due-date, quality levels, termination of agreement.
All your agreements should cover dispute resolution because court is expensive and not the best solution in many cases.
I wish you success in your ventures!