Getting Started On Your Start-Up: Back to Basics
All successful startups grow from a great idea, but turning that great idea into a great business can be a daunting task, particularly when it comes to all the legal challenges involved. To demystify the process, we’ve gone back to basics and compiled just a few tips and tricks that you might find useful in getting started with your startup…
- Make a business plan with your partners. If you are setting up a new venture with one or more business partners, apart from making sure you establish an appropriate corporate structure, it’s vital that you all agree on a business plan. This is to make sure that you are in general agreement from the outset as to the important issues that will affect your business, including:
- the budget for establishing and operating the business;
- how the business will be funded;
- the scope of the business’s activities;
- the commitment to be made by each of the partners; and
- when the partners will be seeking to exit from the business.
- Keep written records. Keep a clear written record of the discussions you have in all your conversations and meetings with other people relating to your business. These may include potential or actual suppliers, investors, service providers, and even business partners. If you’re especially conscientious, even consider following up with an email to confirm what was discussed and what is expect of each person involved in the discussion – it’s not only good practice from a legal perspective, it’s also good business!
- Protect sensitive information. If you are talking to other people about your new business or you are sharing information in some other way, make sure you consider getting signatures on a confidentiality agreement (also known as a non-disclosure agreement, or ‘NDA’). At the very least, if you want a conversation to be confidential, make this clear to the other person before you reveal any sensitive information. You should also make a note of the fact that you agreed that your conversation would be confidential, and then follow up with an email confirming this agreement.
- Always consider whether you want to be bound by your words. When dealing with potential suppliers and other prospective business partners, you need to be clear about whether you intend to form a binding legal agreement with that person or company. A common misconception is that you need to have a written agreement signed by both parties to form a binding legal arrangement – you don’t! An oral agreement, or even an exchange of emails, can be binding. If you are negotiating with someone, or are even in the early stages of discussions with them about a potential deal, use the words “Subject to Contract” in your correspondence, or even better, put this in the subject line of relevant emails. This should avoid there being a binding legal agreement until both parties have agreed to be bound, but you should really involve a lawyer at this stage to help you formulate the terms of the deal and to document it properly.
- Don’t mislead and don’t deceive. You need to be very clear in all your business dealings, whether with suppliers, customers, or other parties. This will help to minimise the risk of being on the receiving end of a claim for misleading or deceptive conduct. Don’t promise or even imply in any conversation or on any platform that you can deliver something, or provide a benefit, unless you are absolutely sure that you can do it. It’s also important to document everything so that you don’t get embroiled in a dispute revolving around conversations where it will be difficult to prove or disprove anything.
- Get legal advice early. If you are planning to launch a new business, have a chat with a lawyer with relevant experience early on to make sure you identify any particular legal issues that may impact your ability to operate your proposed business, or that might require you to structure your business in a particular way. It’s vital to establish the correct legal plan for your venture from the outset, and it could be a costly mistake to wait too long before getting advice!
If you’re ready to take the next step with your venture, and you’re looking for high quality legal advice given with a commercial and pragmatic approach, give us a call on +61 2 9300 3100. We take the time (at our expense) to get to know your business, and operate on the basis of fixed fees for most work so you don’t have any surprises. Whether you are a maverick, disruptor or entrepreneur (or all 3!), we look forward to working with you.
Looking for more information on the legal ins and outs of starting a business in the meantime? We’ve got you covered! Check out our free Startup Pack for a whole bunch of tips and tricks for structuring your company, pitching to investors, protecting your ideas, taking on people, signing up customers, and respecting privacy.