Starting a new business can result in a myriad of issues that are best dealt with early in order to protect your start-up in the long run. Just like the young seedling in our picture, new businesses need to be nurtured and cared for from the very start, to ensure that they can reach their full potential. Here are four essential tips to consider:
- Legal Documentation
Although often, postponed until a business has more cash flow, setting up the correct legal structure can be an essential for a number of reasons. It is important to ensure that your business is set up in the right structure, a lawyer can assist you to determine whether a sole trader, partnership, company with shares or a trust is the most appropriate vehicle for your operations.
Having documentation agreed up front with other parties, for example a partner or investor, can avoid costly disputes down the track. Correct documentation will establish up your game rules from day one!
Appropriate documentation is also something that investors will like to see before they put their hard earned cash into your business. Having the correct structure and protective agreements can show that your business is operating at a professional level and with the appropriate protections.
- Ownership of Intellectual Property
There are many aspects of IP that are important to start-ups. Including protecting trade secrets, obtaining registration for IP, and ensuring that IP is unique before investing in it. However, one aspect that is often overlooked is the ownership of IP. This is often not addressed until an issue arises.
One common oversight is when new businesses don’t transfer the IP created by their founders into their business vehicle (for example into the ownership of their company). Disputes can arise where two parties have come together in a business venture. One party may bring the IP and another may bring the cash. If the IP is not transferred into the business, if a dispute arises and the parties decide to walk away, the person who invested the cash (which may now be spent on various start-up costs) could be left with a business with no IP.
- Incentive of key personnel
Incentivising key personnel can be difficult for a cash strapped start up. Whilst you may have been able to attract a great IT programmer or web developer at the beginning with your vision and ideals of what the business can achieve, you need something to keep them there through the late nights, long weeks and lean years until you come into the money.
There are a number of ways for you to incentivise those critical to your business without paying them wads of cash up front. Entering into option agreements or incentive agreements can provide the long term incentive that they need to keep them pushing through. Providing these arrangements aligns your interests with your key personnel and rewards them for their efforts to achieve your dreams. Although such arrangements may dilute your ownership or profit down the track, wouldn’t’ you want a smaller piece of a bigger pie, than a whole plate of nothing?
- Surround yourself with great advisors
You can’t be an expert in everything and you shouldn’t try to be. Ensure that you surround yourself with the right advisors. Whether they you need an accountant, lawyer, mentor or business advisor, don’t be afraid to ask for help. It won’t always cost you. You will be surprised how often people are passionate about start-ups, or your particular idea and who would be happy to have a chat or point you in the right direction. Use LinkedIn, use your networks, ask around and find people to have in your team who you can rely on.
In an attempt to save money, many start-up businesses make the common mistake of thinking that they can do it all and delay seeking specialist advice until they are in a more fluid position. This can cost time and money down the track in having to restructure incorrect arrangements, potentially rebrand if there are intellectual property issues or as a result of a badly planned budget or forecast.
Gladwin Legal can assist in all areas of start-up law. To get an in-depth evaluation of your current business to see where you’re at, just contact Gladwin Legal on or 1300 033 934.