As lawyers we often see repetitive mistakes made by startup companies. Here are 7 of the most common mistakes that you need to look out for:-
The co-founders must be absolutely clear on the terms of the arrangement between them. Things such as the ultimate goals of the startup, what percentage of ownership each co-founder gets, profit shares, responsibilities and the level of work required from each co-founder are essentials that must be agreed upon first up. Needless to say it is essential that the co-founders’ agreement on these things be in a written legal document.
You need to select the most appropriate type of legal entity for your business. Is it a company? Is it a sole-proprietorship? Is it a partnership? Is it a trust?
It is important that your business have good standard form contracts to go out to customers and clients. These will be commonly referred to as your “terms and conditions”. It should include things such as pricing, payment due dates and how disputes are to be resolved, amongst other things.
You must make sure that all relevant parts of the corporations laws and ASIC rules are followed when issuing shares to family and friends.
Maintaining organised and complete employment documentation is extremely important. Not properly maintaining and updating this information can make your company vulnerable to being sued. If you make a mistake paying salary or benefits to one employee it could be multiplied over a number of them.
If you have created a unique product, service or branding for your startup you should take intellectual property rights seriously by properly recording and enforcing trademarks, patents, copyright, business names, designs and/or confidentiality agreements to protect your product and your company.
Often when a disaster strikes a start-up business it can be obvious that the biggest mistake was the failure to get proper advice from their accountants and/or lawyers! Getting proper advice when starting a business (or whenever a problem appears to be brewing) could save you thousands of dollars in the future