May 9, 2017

Useful tips from a lawyer for launching your startup with friends

Updated: 8 December 2019

Are you considering a startup with friends?

You have discussed a brilliant startup idea with your friends, you have skills that complement each other and now you are seriously considering launching your startup together.

Here are some tips on how to keep your friends before, during and after your startup takes off.

1. Agree your respective roles upfront

Agreeing roles upfront is essential.

It is a good idea to agree how to split accountability for certain roles and this could be based on your skill sets.

For example, you may group and assign roles in the areas of:

  • creative (website, app, social media design and branding)
  • financial (monthly accounts, engaging an accountant, paying suppliers)
  • people (hiring, customer relations) or other groupings.

2. Have good agreements

Well drafted agreements help you to come back to what really matters and should be done when there is a disagreement.

Documenting roles and responsibilities in a founders agreement or employment agreement can be useful for setting clear expectations and reducing disputes.

You can also build in some flexibility by encouraging rotation between certain roles to cater for changing needs of your startup and maximise job satisfaction.

3. Disputes

Disputes can expensive, messy and a real time waster.

A useful tool that can save you a bunch of money is a clause in your founders agreement that deals with procedures for handling disputes in your startup.

A popular approach is mandatory mediation before either party can start legal proceedings. When issues escalate it can be because of a build up of not being heard, and in some instances, mediation can resolve that issue.

4. Remuneration

Deciding on pay upfront is important.

One fair way of deciding financial compensation for startup founders is based on each founder’s time and financial contributions. You can document this in the founders agreement or in a shareholder agreement.

Did one founder or more founders pay for most of the startup costs ?

In that case, you may want a clause in your founder’s or shareholder’s agreement that addresses repayment of founder contributions before any profits are distributed.

5. Business plan

Have you considered a business plan ?

Preparing a business plan upfront can help keep you on course when you feel like you have lost your vision.

Your business plan does not have to span across 5 to 10 years, but certainly having a vision and your key milestones for the next 6 to 12 months can help you focussed on success-critical activities.

So many organisations have good templates for you to follow.

If you plan on getting a loan from a bank, you may wish to follow one of their templates. We don’t advocate any particular bank, here’s our search result for “business plan templates australia banks”.

6. Perspective

Speaking to a trusted advisor can be helpful for an objective opinion.

This is particularly useful when you are so buried in the details that you might be missing important parts of the bigger picture.

Got thoughts about other helpful tips/lessons learned from launching with friends? Be sure to leave them below. 

I wish you success in your ventures!

We’d love to hear from you in the comments below

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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