How important is legal advice for a start-up?
As a start-up, you are embarking on something that will impact not only your future but the futures of many.
All businesses are underway with an idea and some money. If you come up with a great idea and decide to start selling a new product, or you begin working on a new technology platform, it is important to have adequate legal advice.
Every Start-up needs a few legal advices without which the success of it will become very challenging.
Here are 5 reasons why legal advice is important to start-ups.
Mutual/ Contractual/ Vendor agreements
Chances are that no matter what service/business you are in, you will need vendors or service providers at various points.
Anything from your telephone/internet provider to your website designer would be considered a vendor/service provider for your business. Having a vendor agreement in place is important because it helps set the expectations between the parties when it comes to the type and quality of services provided, the duration of services, the cost and payment terms, and liability considerations if things don’t go as planned.
The Goods/Service, Payment Terms, Termination/Term, Warranties, IP, Confidentiality, Liability and Indemnification are some aspects that need to be clearly stated in these contracts.
For example, if you have outside assistance on design or development of the product, manufacturing contracts, EPC contracts (relevant for a factory or plant), platform contracts, marketing contracts, content supply agreement, distributorship agreements, advertisement agreements franchisee agreements etc. are important – depending on what business you are in.
However, an agreement shouldn’t be signed blindly, instead, a legal expert must review the agreements to ensure that it adequately covers your interests.
Compliance with company formation; Company secretary for MOA
Legal advice is also critical when it comes to incorporation. There are a list of compliances that need to be adhered to, based on their applicability.
Board Meetings, Registered office, PAN/TAN etc. and a list of compliances will save you money, time and much hair-pulling later on.
A company secretary has a vital role in ensuring your company complies with the law as he/she is the head of the administrative division of a company under the Companies Act.
They file the annual returns and other documents to Companies House, normally on an annual basis, and are responsible for convening board meetings.
A Memorandum of Association (MOA) that is prepared in the formation and registration process of a limited liability company to define its relationship with shareholders is also important.
This is the constitution of the company along with the Articles of Association.
Financial advisor to set up process, tax compliance and to raise money
Many fall into the trap of thinking that they need to “have money” to work with an advisor.
One has to remember that financial firms/Consultants work with clients at each stage of the game. According to a 2013 Sage Survey, most of the successful entrepreneurs interviewed brought on an accountant at the early stages, and fifty-three percent reported doing so right when they started up.
Studies on business failure regularly find poor financial planning to be the second leading cause for a company’s decline.
It is important for a start-up to navigate the complicated financial landscape and for this one needs a financial advisor.
Advisory team or advisors for Business validation
Start-ups that have mentors track metrics effectively and grow faster. Start-ups with mentors raise 7x more money and have 3.5x better user growth than start-ups that do not explicitly seek out the assistance of advisors.
Advisory boards boost start-up credibility and facilitate growth and increase start-ups’ chances of success.
Human Resource advisor / Partners
In light of the recent scandals at high-growth start-ups like Uber and Thinx, we need HR in all organizations, big or small.
HR isn’t only for compliance, but they are the foundation for talent and human capital. Today, HR is involved in business forecasting, creating business ROI and executing progress that is directly tied to business success.
HR is your company’s strategic business partner invested in the success of your organization. Once the company has a founder and more than two paid employees, your third employee should be an HR manager.
This person must be highly experienced with HR compliance, strategic hiring, work culture and structure.