3 key legal issues for every start up business

You’d be surprised at how many start ups enter the market without the appropriate legal documents protecting their interests. Of course it is an exciting time watching your start up dream become a reality, but your dreams can quickly turn into a nightmare. Consider what would happen if someone reveals your big idea or a founding partner decides they want out of the business suddenly?

Here are three key legal issues that start ups need to consider from the beginning to avoid legal strife later on.

Shareholder Relations

A shareholder agreement is essential for any start up when multiple ‘partners’ are involved. They outline and define the financial and operational rights, and responsibilities of shareholders and help avoid messy disputes further down the track. These rights can include a shareholder’s role within the business, the business structure, profit distribution, share transfers and governance issues. Your shareholder’s agreement becomes a legally binding contract once signed by all partners.

Intellectual property (IP)

Most people don’t realise the impact of IP on the value of their business. In fact, your brand, logo, copyright material, domain names, trademarks and patents are valuable assets, particularly when you are seeking investors in order to grow. That’s why protecting your IP from the beginning can help you avoid disputes about IP disputes later on.

But what about IP work commissioned by independent contractors? You’ll often find many start ups outsource work, such as brand or software development, to independent contractors as they don’t have the staff to do this work in house. In most cases, the copyright is retained by the author. So before hiring an independent contractor to do work, ensure they sign an IP Assignment, assigning the intellectual property ownership rights to you or your the operating entity.

Confidentiality

Protecting your confidential business information and ideas are crucial when starting any business. For this reason, a Non Disclosure Agreement (NDA) is a necessity before you enter any discussions with third parties, whether they be potential employees, contractors or investors. In your NDA you can specify how to handle confidential information, who owns the information, how long the information is confidential for and define exactly what is confidential. And remember, a NDA is much easier to enforce if it is in writing, and signed by those with access to the confidential information.

Of course, the legal requirements of every start up is different. That’s why it is important that you seek advice from an experienced IP lawyer to ensure that you and your partners are protected. A little time spent on the legalities in the beginning can save you from messy and expensive conflicts further down the track.