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Key Commercial Law Issues Founders Need to Know


Getting a startup off the ground is an exciting feat so it’s no wonder founders focus a large portion of time marketing their product, hiring a team, and working to secure sufficient investment. In their efforts founders can often overlook one of the most essential components involved in launching a startup – establishing adequate legal armour. Whether due to the cost of consulting a commercial lawyer, or the perception that drafting legal contracts is too demanding, founders often postpone protecting their venture until it is too late. To safeguard your startup, we have devised a list of the top legal issues startups should consider from the very beginning:

Intellectual Property

Your startup’s intellectual property or ‘IP’ is at the core of your startup. Afterall, it is the value of a startup’s idea that makes it lucrative. It is therefore vital that as a founder you protect your proprietary rights from the outset. This involves an understanding of what constitutes IP and how you can protect it from being stolen or used by third parties. To safeguard your IP, you will need to get in touch with a commercial lawyer who will be able to draw up the relevant company contract. 

Business Structure

Before you do anything else, you should consider your startup’s business structure. This will impact your funding opportunities, tax responsibilities and personal liability. Though your startup’s business structure can be changed as your startup grows and develops, setting it up correctly from the outset based on your long-term goals will give your startup a solid foundation. When setting up your business structure, you can choose between being a sole trader, being in a partnership, being a company or a trust. Each option will have its own set of legal requirements. Consulting a business commercial lawyer may help you in determining the most suitable option for your startup.

Shareholders Agreements

A startup’s shareholder agreement formalises the business relationship or partnership. The legal contract should contain the founder’s roles, responsibilities, salary, liabilities, equity in the company, limitations on their ability to work elsewhere and dispute resolution processes. Your venture’s shareholder agreement will protect your startup if your business relationships go awry.

Employee Contracts

Before hiring team members, ensure that your venture has the right company contract agreements in place. Employee contracts can be simple legal contracts that outline the basic terms of employment such as working hours, salary, probationary periods, and job outlines. An employee contract will also enforce confidentiality and protect your companies IP. Potential investors will expect to see that you have conducted your due diligence and drafted the necessary legal contracts for your venture. A business commercial lawyer will know which financial services and company contract agreements will work for your startup.

Terms and Conditions

It is particularly important for online businesses to develop thorough and comprehensive terms and conditions. Your venture’s terms and conditions are a legal contract between your business and the people accessing your product or service. Without clearly defined legal contracts, your business will be at risk of potential lawsuits and disputes.

Shares & Equity

If you are issuing or promising equity to angel or other investors it is important that these arrangements are formally documented. This should involve complying with the relevant mercantile law procedures and regulatory bodies such as those governed by Australian Securities and Investment Commission (ASIC). Founders should also think carefully before signing any agreements that may contain exclusivity provisions or dilute a founder’s ownership. A mercantile law professional or business commercial lawyer should be consulted before entering into any new agreements. 

Failing to consult a business commercial lawyer to determine what your startup needs to be properly protected can result in difficulties and costly disasters down the road. At Allied Legal we understand how you can safeguard your startup by using the right legal contracts to suit your venture. To find out more, you can connect with one of our business commercial lawyers by giving us a call on 03 8638 0888 or sending us an email at hello@alliedlegal.com.au

You might also like our article Key Challenges of Launching a Startup.

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