The business of corporate law relies upon the entrepreneurial spirit of its clients. So, if you have decided to pursue your dream of becoming an entrepreneur, for a lawyer (and for our beloved Clausehound.com), that’s great! But just as much as the law thrives upon entrepreneurialism, entrepreneurialism flourishes with the proper legal services—it’s a two-way street.
So, you have a great idea and are wondering what to do next. Your immediate thoughts are probably not far from “how can I reap profits from this,” and hopefully you do not forget this one, “how can I protect myself and my great idea?” Unfortunately, this is the point at which many budding entrepreneurs go astray. They forget to think about the legal services at their disposal and how they can be used to make the most of their once-in-a-lifetime idea.
Start your journey by travelling on a solid legal foundation: Entrepreneurs have chimed in on what they believe to be the most important legal services for people starting a business. The most common thread between them is the concern that a business begins on a proper footing, and thus has its best chance at being profitable. This requires entrepreneurs to be proactive and seek counsel at the budding stages of their business to avoid potential problems down the road. If you are starting a business or know of someone who is, note the following legal services that prove to maximize entrepreneurship.
Do the right amount of planning for your future wealth: Ensure that you choose the right model for your business, with the appropriate tax considerations and liabilities structures in mind.
Many entrepreneurs choose business organization models with a view to tax considerations and risk or exposure to personal liability. Incorporation, for instance, can be attractive to business owners for the protection of personal assets from being used to satisfy the debts and obligations of the corporation; but incorporating also drags along double taxation, where income taxes are paid twice on the same source of income, at the corporate and individual levels. Receiving the proper advice from a lawyer can help you decide which business model would work best in your situation. A lawyer will also be able to ensure that you have all the appropriate structure such as the proper share classes. It’s a worthwhile conversation to have. But a word of caution caution—don’t overemphasize the setting up of infrastructure (like your future tax planning, your legal structure, or your projected office expansion) over getting down to the nuts and bolts of building your business.
Ensure that you protect your information and your idea, and have an Intellectual Property assignment agreement executed: Many entrepreneurs choose to draft their own contracts or have a close lawyer friend do so, but unless you or your friend are skilled in intellectual property assignment and contract drafting, these options could be detrimental to your business!
When you hire employees and outside developers, and there is no doubt you will, legally protecting your and your company’s rights to the intellectual property can be done through an Intellectual Property assignment agreement. You will also need to execute employment or contractor agreements; and in addition to the customary terms included in those, such as provisions outlining compensation, you will want to include confidentiality, non-compete, and non-disclosure clauses as well.
Now is not the time to wing the legal details. Protecting your intellectual property is certainly worth paying a bit more up front for a well-drafted contract.
Ensure that your documents and practices are vetted for compliance with all statutory and legal requirements: You can rack your brain trying to ensure that the business you are starting is compliant with the plethora of statutes and common law requirements that might apply to it, or you can seek a lawyer to do that work for you and trust that it will be done correctly. Whatever your niche is: restaurant, nightclub, web app, chatbot, health-tech, crowdfunding, product or service, there is a lawyer that has dealt with a dozen similar companies and has the regulatory framework at their fingertips.
Regulations are not your enemy—they can be a barrier to entry for reckless competitors, so make sure you understand what regulations affect your business and take the time to think about (or ask your counsel) what the philosophy is that prompted those regulations.
Ask your lawyers for introductions: If your business can gain from potential investors, such as venture capital firms, a great way to increase the value of your business in their eyes is by having your lawyer suggest a negotiation approach that is market standard, or to suggest an advisor or investor who is willing to meet with you and/or guide you. Lawyers are often willing to make introductions that would take you a while to achieve. Make sure your ask your counsel for help. After all, your success is their success. Successful business lawyers and successful entrepreneurs are walking a two-way street.
Written by Jennifer Ashley Andaya
Edited by Rajah Lehal, Ian Hume and Alina Butt
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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.