• Antonio de la Esperanza

Start Up #3 - 10 items on the legal check list for start ups


Welcome everyone!

Following yesterday's post in which I talked about how sometimes entrepreneurs don't know everything about their companies (specially all that information which is legal-related), I thought it would be good if I could list I believe are the most important things every start-up should have properly regulated.

1. Incorporation: it may seem odd that I mention this, but you would be surprised of the large amount of people starting business without the proper protection that a corporation gives you. Make sure to speak to your lawyer as to which is the type of corporation (this is very country specific);

2. Charter (or by-laws or articles of incorporation): this is the basic document of the company and it is required when you incorporate. Make sure to include the basic functioning processes of the company in here with all the minimum requirements under local law (which may include the composition of the board, number of shares or shareholders and board meeting procedures);

3. Taxes: even if you are losing money (as most star-ups do in their first years), make sure that you have everything filed in due course. Tax authorities can be a pain in the a*" if you missed to follow all their processes;

4. Shareholders Agreement: this is KEY, specially if you want to look for funding. Having a basic shareholders agreement sets a very good precedent for negotiating your founder's rights in further revisions after funding. I will make a separate post about this;

5. Vesting rights: this is more proper in countries where there is a difference between authorized shares and issued shares. However, setting up the right of the founders to increase their participation in the company is always a good way to protect their decision making capabilities;

6. Intellectual Property: another KEY issue in tech startups. You want to avoid any issues with the fundamental aspects of your product and it is a requirement of every investor with some experience. Have all your copyright and patent applications ready and have someone monitor the renewal filings (if applicable);

7. Employee contracts: labor liabilities can be, with tax related liabilities, very tough on the ability of a start-up to prosper. Make sure all your employees have a compliant employment contract and that they have an obligation of confidentiality with respect of their work. This will protect you from unwanted leaks of information;

8. Privacy policies: specially with startups that collect information from users. Have the terms and conditions and the privacy policies reviewed by an specialized attorney. Remember that they are contracts between the company and the user and that can end up in a law suit;

9. Licenses: depending on your activity, you may need approval to operate or to be registered with some governmental authorities. Make sure you're always compliant with these little aspects as government like to find any tiny detail to bother you.

10. Hire a lawyer: yes, I know this is very convenient coming from a lawyer, but it is true. Make sure you have someone that can explain all the documents above and that is going to fight for your rights in any negotiation. Never rely on other party's lawyer as their fiduciary duties are not with you but with the other party.

I hope this is helpful. I would like to hear from your if you think I'm missing something. I will do several posts expanding certain topics of this list.

T

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