Essential Tips For Startup Companies From A Business Attorney

As an entrepreneur facing the challenge of steep start-up expenses and uneven cash flow, it may be tempting to cut costs on legal advice and plow your money into product development and marketing instead. After all, you only need to call in the lawyers when something goes wrong, right? Wrong. As any business attorney will tell you, having reliable legal support early on in your entrepreneurial journey can make a world of difference to your startup down the line.

In this list of essential tips for startup companies, we discuss the key areas in which you’ll want to draw on legal support as you grow your venture.

Founders’ Agreement

When you and your co-founders start, you’re focused on bringing your vision to life and getting an excellent product or service to market. At this early stage, it may be easy to postpone formalizing the legal relationship between you, because you don’t even know if you have a viable business yet. However, this is an unwise approach: most business attorneys would strongly recommend that you draw up a founder’s agreement as soon as possible. Typically, a founders’ agreement sets out clear roles and responsibilities for the founding team, outlines each founder’s equity stake in the business, and caters to issues relating to IP (intellectual property) rights and the possible exit of a founder.

Countless startup founders become mired in legal proceedings that arise once the business has reached some level of success. This is often because a complete founders’ agreement was never drawn up, and disgruntled founders take advantage of this to gain more control over the business or a higher equity stake. You can avoid this risk by hiring a reputable business attorney to help you draw up a founders’ agreement and iron out any disputes about the apportionment of equity between founders at an early stage.

Business Structure

Ideally, entrepreneurs should be seeking legal advice months before attempting to register their business. This is because they need to decide which business structure will best suit their enterprise before drawing up the founding documents that need to be submitted for registration. For example, whether an LLC (limited liability company), a corporation, or a partnership will be more suitable for your enterprise will depend on a variety of factors. The kind of business structure you use will have tax implications, impact how stock is structured, determine founders’ liability, and have consequences for the governance of the business, among other things.

It is vital to seek out a Miami business attorney familiar with Florida corporate law who can assist you and your fellow founders with navigating the important decision of which business structure to use. Once you have settled on a structure, your attorney will also draw up the constitutional documents, ensuring they comply with applicable business law, and assist with the necessary filings for registration of your business’s name.

Intellectual Property

Possibly one of the most important tips any business attorney can give to a startup founder is: protect your IP. The novel idea that sets your business apart is worth nothing if someone else can use it and capture market share with it first. Depending on the nature of your product, you may need to patent it, or at least submit a provisional application for patent in the interim. You should also seek to protect your brand by considering registering your brand’s trademark. Remember, an intellectual property lawyer will be in a much better position to protect your business from copycats and trademark infringers if you put the necessary IP protections in place when starting.

Financing Agreements and Negotiations

Navigating the world of financing can be overwhelming even for seasoned entrepreneurs. Whether you’re working with angel investors or courting potential seed funders, it is important to have a trusted business attorney by your side throughout negotiations. Unfortunately, many founders give away too much equity too quickly in the effort to raise capital, only to regret it over the long term. Attracting financing is certainly an important aspect of any startup’s journey, but you need to be guided by a trusted advisor who will protect your interests in negotiations and help you decide when to push back on an offer and when to sign on the dotted line.

Employee, Supplier, And Consumer Contracts

Contracts make the business world go round. From employee contracts to rental agreements for your office space to supplier contracts, service level agreements, and more, you’ll be amazed by how many contracts your business is a party to even within a few months of operation. It is rarely a good idea to rely on standard-form contracts for your business: each business has unique interests that need protection and risks that need mitigating. Whether you need to draft a contract or are reviewing a contract presented to you by a counterparty, hiring a business attorney with a wealth of contract law experience to assist you is critical. They will ensure that your business interests are protected and that the terms of the contract are clear, lawful, and reasonable.

The value of a well-drafted contract often only reveals itself down the line when startups are well into their operations and a business dispute crops up. Though a commercial litigation attorney will always do their best to represent your business in court, if the contract being litigated is poorly drafted or does not adequately protect your interests, you will be facing an uphill battle. Developing a strong relationship with a business lawyer who understands the nature of your business early on in your entrepreneurial journey will limit your exposure to contractual disputes and help you to create strong, mutually beneficial relationships with your suppliers, employees, and other business partners.