Launching and growing a company is an incredibly exciting time. New business owners will be filled with passion for their products or services. Whatever the field, there are potential risks involved. Risk management may not be the most exciting of topics to cover. However, think of it as insurance. No one would purchase a brand-new property or vehicle without having a policy in place. Therefore, taking legal advice in advance can help protect the startup and ward off potential difficulties.
Here is a collection of the different types of legal documents startup owners must read and obtain for business success. This helps keep business owners on top of their game and ensures there are no nasty surprises later down the line.
Articles of Association
Articles of association are public documents. Each business must have one by law. This document tells third parties how the business is run, as well as how it makes decisions. Most businesses that are purchased off the shelf from a broker or agent will have a set of standard articles. These may need to be adapted as the startup grows and more investors or shareholders come on board. In a nutshell, Articles of Association form a document that outlines the regulations for a start-up’s operations, as well as defines the business’s purpose.
Unless the startup is run alone, there will be several members of the team bringing their expertise to the forefront, such as the co-founders or partners if there is a partnership. A founders’ agreement is a private document between the startup founders. This document describes what the company has been set up to achieve at a strategic level. It may also outline the duties of each team member, as well as how shares will eventually be owned. A founders’ agreement also details what protocol is in place should someone wish to leave, as well as how to handle disputes. While this document is informal and not legally binding, it is recommended to take out to protect the startup from damaging disrupts between founders later down the line.
The main kinds of employment status are employee, worker, and freelance. An employee is somebody who spends most of their time working for the business. For startup owners who wish to employ others, they must have a written statement of employment particulars at the bare minimum. This means a summary of the main terms of employment, such as hours and pay. If the employment contract is large or has images, there is a tool that can convert it from JPG to PDF format. This makes it easier to share the document with employees.
Intellectual Property and Assignments
Intellectual property is likely to be one of the most valuable assets of the startup. This document lies at the heart of a company’s valuation. All startup owners must establish who owns their company’s intellectual property rights. For those who have already taken on staff, business owners will own the IPR in anything they have created already. An intellectual property assignment is a legally binding document. This transfers ownership of intellectual property from one individual to the next. For those who do not have ownership of IPR, this can cause trouble later on, especially if there are plans to sell the company. This is because potential buyers will want to see clear rights to use the IP.
NDAs and Confidentiality Agreements
When conducting business, there will often be times when confidential information will need to be shared with another person. This is where an NDA comes into play. An NDA (Non-Disclosure Agreement) is a legally binding document. This requires that person to keep any confidential information shared strictly with themselves. This information must not be passed on to another individual or be stolen to be used for themselves. NDAs normally contain provisions such as who the parties are, what information is classed as confidential, and how long the agreement will last.
Contracts with Suppliers and Customers
A contract is an agreement where one or several individuals agree to do something for another party in return for payment. Contracts do not have to be in writing, provided all essential elements are there and each party clearly intends their agreement to be binding. Because of this, it’s incredibly risky for businesses to do or receive anything of value unless everything is in writing. If the stakes are high, startup owners should contact a commercial lawyer. They will draw up a supplier contract and ensure everything is above board. Also, a solicitor can provide terms and conditions of business that can be used, especially when working with customers.
Having the right legal documentation in place from the start sets up legal protection, establishes roles and responsibilities, and provides a robust foundation. This allows the startup to grow into its own and have a fighting chance of success.