We're going to give you 5 golden tips for starting a
start-up that can help you along your journey to an early
Think about structure:
Your choice of structure (sole trader, company, trading trust,
group of companies etc) will have tax and liability implications.
You need to think about what structure will work for you. A common
option is a proprietary company limited by shares, which will
protect your shareholders from liability. It is also common to
consider putting any valuable IP in a related company that is
separate from the "operational" part of the business. Of
course, the best option will depend on your circumstances, but
we're going to assume you have thought about all of this and
decided a shiny new company is the way to go. Right, onward.
If you are more than one, put a shareholders'
agreement in place:
If there are other cofounders or lucky you have a seed investor,
you should determine what rights each shareholder has from the get
go. It may not seem a priority when things are going along
swimmingly but, when the money starts rolling in, or if things get
a little hairy, the relationship may not be so congenial.
You should think about:
Who get what percentages of shares in the company and who are
What decisions about the business and company require everyone
What are the roles and responsibilities of each of the
What do they need to contribute (or what do they get to
What do you do if one of the shareholders isn't pulling
What happens if a shareholder leaves?
What if you want to sell the business?
Spending a bit of time early on in the piece setting out
expectations will save you a lot of strife down the line.
Prepare a standard set of terms and
If your start-up involves supplying products or services, you
should have a standard set of terms. The alternative is to let your
customers impose their terms, which will leave you with
inconsistent obligations across your customer base. The better way
is to think about what terms are right for you. As a start, you
should think about:
What is the scope of the agreement (i.e. what are you agreeing
How much and how often will you be paid?
How can you get out of the agreement if things go pear
Are you protecting your intellectual property rights? Don't
give them away!
Protect your intellectual property:
You need to consider the ways you can protect the IP, valuable
ideas and know how that you develop. In the first instance, you
might want a confidentiality agreement to use before you tell
anyone anything. And maybe you should consider registering your
name or logo as a trade mark, or register a patent if you have a
new product. The way you protect the IP really depends on what it
is you've developed.
Put contractor and employee agreements in
Many start-ups (being low on the cash front) give contractors or
employees the right to shares in exchange for their work. Whatever
you want to call this arrangement (sweat equity, option agreement,
reverse vesting agreement because you are a Silicon Valley
wannabe), just make sure everyone is clear about exactly what
rights you're giving the employee and what work they need to do
to get those rights. If you are giving them shares (or options over
shares), think about whether you will give them the same
"full" rights as your shares - will they be paid
dividends, but not given the rights associated with traditional
share ownership (like the right to vote)? And what happens when the
employee moves on from the company?
One of the main purposes of contractor agreements is to ensure
that all the IP is owned by the start-up and that contractors
don't have claims to the IP later when you are making
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