With the emergence of entrepreneurship and start-ups as an increasingly viable career path, we are seeing more new businesses launched each year than ever before. Though simply starting a business is no guaranteed path to success, avoiding common pitfalls when creating your company will go a long way in making sure you get started on the right foot. From a legal perspective, here are three things to keep in mind and how to take care of them without breaking the bank.
Selecting the right business structure for your start-up is important. Key considerations will include the type of business you’re starting, costs associated with forming particular entities and tax implications. Self-serve tools for business formation are more accessible than ever before. As an example, Founded.co offers incorporation for less than $500 if you complete the process through their website and they’ll even throw in a 1-year online minute book.
Important agreements must be in place at the outset to confirm the rights, responsibilities and obligations of all stakeholders involved in running the company. Here are three documents that every company should consider:
- Shareholders Agreement – Limited by shares, this document regulates how the business is run and protects the owners on a day-to-day basis. Increasingly, funding providers are making a shareholders agreement a requirement for their involvement in a business.
- Employment Contracts – Essential for both staff and employers, no business should operate without employment contracts in place. They clearly outline rights, responsibilities and obligations of each party over the term of the contract. The job security and rights of an employee are protected while an employer can limit its risks from events like a breach in confidentiality.
- Non-Disclosure Agreements (NDA) – Protecting sensitive and confidential information through NDA’s is common practice today. Companies use NDA’s to make sure information and ideas aren’t stolen by parties they’re sharing them with.
The value of intellectual property should not be understated. Companies must protect their IP early to allow themselves every opportunity for separation from competitors. While it may not feel like a top priority, exclusivity can go a long way in capturing market share and maximizing profits before others have the opportunity for develop copycat solutions. Patents, industrial designs, trademarks and copyrights are among the most commonly protected intellectual property.
On a Budget?
Legal services are often associated with unreasonably high hourly rates, but there are ways to avoid excessive legal spend so you can put your finite resources towards growing your business. For example, reviewing legal documents will take less time for a lawyer than drafting them. Today, companies can use less expensive self-serve document generation tools to create their own documents without lawyer involvement. A lawyer can still be used to review the output to identify anything that’s incorrect or missing, but the time commitment on their part (and corresponding cost) will be much lower.
CEO Law is partnering with ClauseHound to allow clients to create their own documents at www.ceolawcanada.com. The partnership will provide cost effective access to more than 10 commonly used legal documents for start ups and small businesses. Stay tuned for more information as we roll out this exciting feature in the coming months.