This is an often neglected question but also a very pertinent one for Small Companies...
1. Before you start
It's worth chatting to your lawyer before you pursue your dream venture so you set off on the right foot. What kind of business is it? Does it have intellectual property
like a copyright
? Could it have a patent? Will it need a trademark? Will it be a limited company? Or a partnership of some kind? Will it need funding? Will you be taking on staff or developing software? Will you be taking in investment? These are all aspects on which your lawyer can give you some friendly advice before you even get going. It doesn't have to be expensive or long-winded - with LawBite it never would be. But it can avoid you making unnecessary mistakes at the beginning of your entrepreneurial adventure.
2. At the beginning
You may now need to legally form a partnership or company. Is its proposed name free to use? It needs to be registered. If it's a company it will need articles to govern its operation. Various resolutions will need to be passed to establish the company and issue initial shares. Who will the Director(s) be? If there are investors there will need to be paperwork covering their shareholdings, payment and controls and defining your responsibilities to them. If there are other founder shareholders then matters will need to be regulated with them, so that you both know where you stand regarding ownership, exit and controls. Any IP may be protectable and a lawyer can help you get protection for a trademark or design right or get you started on the complicated road of trying to secure a patent.
3. As you grow
There may be further funding rounds. Perhaps more seed funding or maybe a "Series A" round? You will need paperwork to cover that for sure. You will have employees
aplenty now. Their paperwork needs to be complete and consistent. Maybe you have option schemes running to incentivise employees or non-execs with shares. Those kinds of schemes require intricate paperwork and rules, which lawyers can help with. You may have multiple trading partners - licensees, distribution partners, agents, introducers, marketing partners, e- commerce providers, manufacturers. Your cash and your margins depend on these relationships. You cannot afford to skimp on the paperwork. A commercially minded lawyer can help protect you from risk and improve your upside from these kinds of arrangements by drafting simple paperwork which reflects the needs of your business.
4. When you exit
The dream moment. At last after all that effort comes your deferred reward. Except that the purchaser will undoubtedly be looking for ways to minimise the purchase price or defer it
, so that you only get some of it now and the rest by way of "an earn out" in, say, three years’ time. Your lawyer can help protect you during this phase, assisting you with the endless due diligence enquiries from the purchaser's lawyer, reviewing the purchase agreement for you, and helping to negotiate terms so that you get the best possible benefit now, and the most protection after the purchase in relation to warranty claims and any purchase payments which you agree to defer. We all know that (some) lawyers do not give the service that customers want - costing too much, being too slow, providing lengthy paperwork that nobody understands and which is not ‘bespoked’ to the business. However the right lawyers can be invaluable to you during these four phases of your company's path to success. Journey further...