A startup is a company working to bring new, innovative products or services to the market. We elaborate on a startup’s legal needs, and a startup lawyer’s role.
According to Forbes, ‘Startups are young businesses, formed to create a one-of-a-kind service or product, commercialise it, and make it irresistible and exceptional to customers’. Startups have one goal: to profitably sell their products, goods, or services to the general public. Startups are unique because they can expand rapidly.Therefore, consulting a lawyer for a business startup is essential to build a strong foundation for your business.
Wil Schroter expanded on the definition of a startup by calling it ‘the living embodiment of a founder’s dream’. In essence, startups are visions brought to life, legacies that will last for a long time.
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What does a startup lawyer do?
From incorporation to investment negotiations, startups may require legal services to ensure success. For example, startups may have to deal with government-established institutions, for services such as the issuance of licences or payment of taxes.
Risk management is at the top of the list because startups require protection from various risks when dealing with third parties. Contract drafting, including founders agreement or a non-disclosure agreement, and management is useful in avoiding risks. Contracts are essential documents for any new business.
Intellectual property protection is essential at the outset. Trademark and patent registration can occur at the start of any business, especially in a business that is highly creative or deals with consumers and clients.
Benefits of hiring a lawyer for your business startup
An experienced business law attorney will understand your state’s legal requirements for starting a business and provide you with the necessary paperwork to get started. If you decide to start your business without the assistance of a lawyer for a business startup, you may face legal issues later.
- Help you succeed
You must do everything possible to ensure that your company survives and thrives for years. Hiring a business lawyer is just one step towards ensuring your company’s success. There’s no telling what challenges you and your company will face during your venture. Therefore, planning for the worst-case scenarios is critical.
Businesses face numerous challenges, including finance, creative, and legal issues.
Taking the necessary steps to prepare for those challenges will ensure that you are ready for them if they arise. For example, you may need to reorganise your financial structure through bankruptcy, reach an agreement with a business partner, or defend your company against legal claims.
Hiring an attorney before these issues arise will help you avoid them.
Communicate with investors
Lawyers interact with people of diverse backgrounds. Some people may even be able to connect you with some of their contacts such that they benefit your business.
An attorney can assist you in maximising value as well as minimising risk. A good lawyer for business startups can advise you on the tax advantages of one type of incorporation over another, and he/she can help you with capital gains taxes.
Based on experience, a great business counsel can introduce you to accredited investors’ capital sources. Connecting proven financial backers can help you get a strong start with funding and high valuation.
In their haste to market and establish their startup, many entrepreneurs fail to consider potential legal issues or believe such issues can be addressed later. However, this thinking overlooks the possibility that ‘later’ translates to ‘more expensive’.
Avoid legal issues early.
Many small business owners do not think about legal counsel until something catastrophic happens, which may lead to liability to be sued. A case of sexual harassment, wrongful termination, or some other issue has result in litigation. Therefore, consulting with an attorney about corporate employee rights in the workplace before a problem arises is essential.
Safeguard your interests
Many startup founders are unaware of the legal requirements for starting and running a business. These oversights could be costly in terms of media exposure, but they could be even more expensive if legal requirements are not satisfied. A good lawyer, particularly a lawyer familiar with your state’s laws, can inform you of what you need to know and take actions to reduce risks.
Submit the necessary paperwork
A business lawyer can assist you in developing and maintaining positive relationships with your customers, clients, partners, and suppliers by developing appropriate communication vehicles.
A lawyer can review agreements and contracts and keep you out of trouble if you are asked to sign them.
Having a standard contract can make hiring, terminating, and compensating employees, and recruiting board members and advisors easy.
A business lawyer or tax lawyer should be present to ensure that you are following regulatory tax laws for a startup business. The lawyer for a business startup will assist you in establishing a tax structure and obtaining necessary licences, as well as advising you on the tax implications of various business investments and other transactions you are considering.
Safeguard intellectual property
Your product could be new to the market and unique. You could work in a creative field such as design. In either case, if your individual rights to your ideas are not protected, they may get jeopardised. Intellectual property issues can be resolved with the assistance of a trademark, patent, or copyright lawyer.
Whether you are developing intellectual property now or plan to do so in the future, hiring an intellectual property lawyer will benefit your business by ensuring that your work is protected.
Inexperienced entrepreneurs may take on unneeded or unusual liabilities, diluting, or spreading equity too thinly. Before signing any terms, consulting with a lawyer for a business startup about the legality of your agreements can be highly beneficial. You can avoid falling into traps set by unscrupulous investors.
Prepare your business for an investigation
A company founder may find himself in legal trouble when the federal government may initiate an investigation. A business lawyer can guide you through the legal quagmire.
Do I need a lawyer to set up my startup business?
A lawyer’s services are not required to start a business. Many of the steps outlined above for starting a business can be completed without the assistance of a lawyer. Ultimately, whether you hire a lawyer or do it yourself is determined by the nature of your business. Consider the time and effort required to get your business off the ground.
Sole proprietorships, the most basic business entity, can be established without the assistance of a lawyer. No formal or particular registration is required—the proprietor needs his PAN number, capital and a few licences to set up a sole proprietorship. Only a bank account under the business name is essential. Although registration is not compulsory, when done, it can maximise benefits. The proprietor can register by acquiring Udhyog Aadhar under the Ministry of MSME or registering under GST and Shop and Establishment Act.
Partnerships are typically the first entity type for which some business owners seek the advice of an attorney. An assumed business name must be registered at the state or local level.
Although not mandated in most states, creating a partnership agreement for partners is highly recommended. You can also use online legal services to file these forms.
Limited liability partnerships (LLPs) can benefit from the services of a lawyer because these entities frequently necessitate filing articles of organisation (or a certificate of formation) with the state, the appointment of a registered agent, and compliance with other regulatory requirements. Therefore, consider drafting an operating agreement. A lawyer for a business startup can create agreements that are more tailored to your company’s needs.
Filing articles of incorporation, establishing corporate bylaws, appointing corporate directors, and issuing stock to shareholders are critical legal documents. Lawyers can walk you through potential pitfalls before you sign on the dotted line.
Hiring a lawyer for a business startup can help you with many things such as choosing the best business structure, partnership agreements, drafting contracts and agreements to protect intellectual property, create employment and independent contractor contract, examine lease agreements, keep your personal assets safe from business liabilities, explain tax benefit, assist in the expansion of your business into other states and countries, and maintain compliance with federal and state laws.
In the long run, to prevent your business from being lost in the crowd, a lawyer is highly recommended for a business startup.