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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Stages of the Startup Process that Require a Legal Presence
There is a no gainsaying the fact that the initial days of the startup process is fraught with many obstacles. It has been proven that nearly two-thirds of startups will fail within the first two years. Many potential business owners find it hard to face the challenges and quit early on while many put systems in place that will help them avoid sinkholes, last longer and become a part of the select group that go on to become complete successful businesses. One of such systems is the legal arm.
Many new startups find it hard to understand why they should get a legal team so early in the life of the business. Below are the stages of a startup and how a legal team can bring value.
The Formation Stage
The early stages of the business such as registration and incorporation can be completed with the need for a legal team. However, the landscape changes when the business is to have multiple founders and there is talk of equity and investments. At this stage, it becomes dangerous to take decisions off the cuff without proper analysis on possible implications of actions. The corporate setup of your new business is vital. A legal team can will ensure that the structure is properly analysed, removing the possibility of disagreements that can derail the business in future. “When agreements are drafted by qualified business lawyers, all angles that need to be covered will be covered ensuring that stakeholders will know their true position from the start of the business.”-LKC Law Firm.
You will also need a lawyer in the early days if your business has intellectual property that needs to be protected. A business lawyer that specialises in protecting intellectual property will be able to adequately handle the asset registration and protection process. At the end of the process, you will be more protected against spin-offs based on your ideas.
Drafting Contracts Stage
During the growth phase of your business, you may need to hire employees to join the fold or work with some contractors. At this stage, you need to have carefully drafted agreements in place. It is important to note that agreements come into place as soon as the parties involved sign the dotted lines. There is no margin for error. If the agreement has any loopholes, your business may be at risk. A legal team that understands your business processes will be best placed to do a robust agreement. If you are on a budget, you can draw up agreements on your own and then submit to a lawyer for review before the different parties get on board the signing process.
The Funding Stage
This is arguably the stage where a lawyer is vital for your business. A lot can go wrong if you accept investment terms without proper analysis. When choosing a lawyer to help you through this stage, you need to ensure the lawyer understands your industry and the kind of investors you are liaising with. The documents that come with funding are often technical, only requiring a lawyer to make sense of it all. A qualified business lawyer has experience in handling such critical documents and will guide you towards making the best decision for your business.
As a startup, there are many murky waters you have to navigate. A qualified business lawyer that understands the intricacies of your business could be all you need to avoid falling by the wayside.
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