10 legal issues that can ruin dream run for a start up

10 legal issues that can ruin dream run for a start up Starting your own business is indeed exciting. If you have found a funder, even more happiness flows your way. Soon, you would be counted among the most successful names among entrepreneurs in India, bingo! Could there be anything more that you can possibly ask for? Well, for starts, there are quite a few things you should be doing to ensure your idea, your hard work, time and talent hasn’t been taken for a ride. In a dog eat dog world, faith is a weak word, unless bolstered with some solid foundation.

This aspect came into a deeper discussion at the recently held TiE SmashUp 5.0 at IIT Bombay. The opinions were then put forth by the participants who had been meticulous from the beginning, and then there were those who learnt it the hard way. Either ways, the words of experience carried a lot of weight for future entrepreneurs.

Here are a few pointers that can ensure taking the legal route to strengthen your business is not only vital, but also the single most aspect that can decide the future of a company.

1. Founders’ Deal: A Must
When you have invested your lifetime, pooled in money, carefully curated the talent that can help realize your dream of this concept working in the market place, how difficult it is to ensure that your business is also legally protected?

“A mistake lot of founders make is not making a Founder's agreement. It's important to make one usually” says Spice Route Advisors founder Praveen Raju.

2. Co-founders’ deal
Allocating ownership of your new enterprise amongst the founding team is usually done if the main founder desires so. This is usually a subjective matter and can sometimes turn into a major challenge of sorts, a delicate issue that can hurt the prospects of the company. In your own interest, it is imperative that you fix how you would split up the equity between the founding team upfront.

3. Languid about legal knowledge
For instance, complying with securities’ law when you offer stocks, shares to family and friends is a must. It is imperative to ensure you are also aware of securities laws as well when you begin to dole out goodies to friends, family and those who have supported your venture in some way or the other.

4. Intellectual property issues
Don’t get two years into the business, and then realize a name of your product is the same as the name of a foot massager registered in UK. Be sure where you are headed with the issues pertaining to your intellectual property, and others’ too in the same realm.

5. Context of the land
Make sure you are aware of what your market share has to be in the near future and keep dreams as well as your work close to that. Not all markets are the same. We all know what works in India may never work in the UK or in Saudi Arabia. Ensure you are aware of both market, and legalities of the land you are conducting business in.

6. Employment issues
An employment draft is a must even before you hire your first employee. Whether the person is well-qualified to do the required job, and is willing to sign the non-disclosure agreement is something you will definitely want to look into. Be sure to run a background check into your employee.

7. Funder relationship
An investor agreement with your funder should be made, and be revived at regular intervals. As a founder, things get complicated if you fail to read the fine print. Be sure you do everything to protect your dream.

“You have to talk frankly with your co-founders and you have to be firm with investors. Investors will play games with you and your co-founders. Make sure you’re very frank with your co-founders with regard to everything and have a very clear vision and goals,” says Shreekant Pawar, founder of Diabeto.

8. Co-founder agreement
Many business startups go through this hiccup but a lot of them don’t pass on the lessons. What happens when co-founder wants to walk out on the company mid way? Having a proper co-founder agreement with legal bindings on parting terms, this can be the most hassling experience.

9. Legal counsel, taxation
Invest in a good legal counsel who will work for you. Taxation is something you need to work meticulously on, if you are planning on being around for a longer time than a fly-by-night kind of a company.

10. Vendor contracts
When you have to use outside talent for certain aspects of your work, ensure you have them on your vendor contract. Enforce most important aspects about costing, escalation, legal provisions and strict non-disclosure terms in it.

(Image Credits: Indiatimes)