How can start-ups benefit from legal advice?
For busy entrepreneurs, getting effective legal counsel early on in the process could help mitigate many of the risks associated with starting your own business. From incorporation, governance issues, and compliance through to Entrepreneur’s Relief and succession planning, legal advice is vital for businesses at every stage of the journey.
An experienced business lawyer understands the challenges and opportunities faced by entrepreneurs and brings a wealth of commercial and market knowledge to the table, which can help founders manage the complexities associated with running their own business. In the article below, partner Hollie Gallagher outlines steps for navigating some of the common issues faced by entrepreneurs.
1. Protecting your brand
In the early years of building a brand, many entrepreneurs rely on friends and contacts to help them design their business logo, write their website, and source code, and all of this creativity generates intellectual property rights and value. IP rights are business assets that need to be protected using, for example, patents, copyright protections, and trademarks. In essence, protecting the IP rights means the business secures its ownership over those rights. As a result, it’s worth consulting a lawyer at the outset to make sure that any IP rights generated belong to the business (rather than your friends); otherwise, it will have a detrimental effect on the value of the business going forward, especially if you wish to fundraise or are considering an exit.
2. Raising finance
One way to raise finance is to give away equity in return for a cash injection. Although this can seem tempting in the short term, entrepreneurs should look at the whole picture before agreeing to give away shares. Before taking action, founders should consider not only the percentage at stake but also whether selling shares will give any investors control over business decisions. Ultimately, there’s a balance between giving up equity and the entrepreneur retaining their founder status; having a lawyer draft a shareholders’ agreement between the investor and the entrepreneur can help to achieve this balance by clarifying the responsibilities of all parties.
3. Managing employees
In these uncertain economic times, the employment market is highly changeable. Depending on the sector, many business owners are thinking about hiring or rationalising. Either way, consulting a lawyer is invaluable in order to ensure that the appropriate employment procedures and legislation are followed and the entrepreneur understands what their obligations are. This will help avoid any legal issues down the line.
4. Dealing with the small print
Entrepreneurs are typically time poor as they juggle running the business, networking, and growing their brand. It can be hard for founders to find the time to focus on the fine print of essential business contracts, including property leases, banking agreements, and supplier contracts. Such contracts usually involve high capital expenditure and, if not dealt with properly, can expose the business to financial and reputational risk.
Entrepreneurs should also spend some time looking at their own terms and conditions of business. For example, do they need B2B or B2C terms or both? Does their cap on liability match their insurance policy limit? Do their terms adequately cover any data protection obligations?
Enlisting a lawyer to go through the contracts and highlight any problem areas can save time, money, and peace of mind in the long run.
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