October 30, 2019

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    There’s usually a lot of excitement around launching a startup. However, amidst all the anticipation, it can be all too easy to neglect consulting a specialist startup lawyer. This is a mistake, as acquiring legal guidance will help you to pre-empt the kind of issues that could threaten your exciting new business venture.

    Though hiring and working with a lawyer may feel daunting, particularly if you’ve never done it before, it’s a crucial step to take when starting a business. This is because, with the right expertise and advice, you can feel confident that your startup is staying compliant with the law.

    If you still need some convincing, here are four legal issues your tech startup will face in the first few years:


    Legal liability refers to the responsibility that you have as a business owner for breaches and losses. As a startup owner, you will be held legally responsible for breaching or financially harming another party if you breached the terms of your contract. New or smaller businesses are often hit hard if they are forced to pay out for liability. For this reason, understanding your specific liabilities is vital.

    A specialist startup lawyer will understand your industry and the matters for which you are liable. Their expertise will help to protect you against financial risk, business risk, systematic risk and unsystematic risk.

    Issues with multiple owners

    If your startup has more than one founder, a Shareholders Agreement is vital for preventing potential future conflicts and avoiding expensive litigation. Some issues that may need considering include:

    • Who is responsible for decision making?
    • How will profits be shared?
    • What salaries (if any) are the founders entitled to?
    • What are the roles and responsibilities of the founders?
    • Who gets what percentage of the company?
    • How much time commitment to the business is expected of each founder?
    • How will a sale of the business be decided?

    It would be a mistake to wait too long to enter into these agreements, as it’s impossible to predict when or how your vision may differ with a co-founder. Having a strategy in place will save you a lot of time and hassle, and a specialist startup lawyer can help you to agree on mutual solutions and help you navigate conflict.

    Employment Agreement

    Inevitably, as your business starts to grow – you’ll begin hiring employees. For each new employee, you’ll need to draft an Employment Agreement, which will contain the terms and conditions of their employment within your company. This contract should cover confidentiality obligations, non-compete clauses (whereby they cannot leave to work for a direct competitor), and assignment of intellectual property created by said employee. A startup lawyer can help you with the various restrictions and conditions involved in drafting your employee contracts.

    Similarly, if you hire a contractor, you’ll likely not be subject to standard labour laws around matters such as overtime compensation or benefits. Getting the distinction between employee and contractor correct is essential, as misclassifying employees as independent contractors can incur significant penalties as well as damaging trust amongst employees.

    Professional Services Agreement

    If your startup is providing professional services, you may need a Professional Services Agreement. This kind of agreement outlines the terms and conditions under which your business provides specific services. A specialist lawyer can help you to set out:

    • The precise services you have on offer
    • The compensation you expect to receive for said services
    • Acceptance testing
    • The right level of liabilities
    • Intellectual Property Rights
    • Reimbursable costs
    • Time in which you must complete services for a customer or client

    These are but a few of the conditions that will be laid out in a strong Professional Services Agreement – so having an expert on hand to guide you along the way will be incredibly useful. What’s more, without a strong agreement, not only could relations with your clients suffer – you could also find yourself with fines, time delays and lengthy disputes.

    Law 365: the ideal startup lawyers for your business

    Thanks to our extensive experience with the latest technology and the Microsoft Partner Network, the team at Law 365 are perfectly suited to advising tech startups. Alongside specialist, insider knowledge of the MSPN, Law 365 also offers a fixed-cost pricing model, which means that growing businesses can budget legal expenses – and won’t be caught out by unexpected fees.

    If you don’t wish to commit to our services long term, you can also purchase our handy contract templates. At Law 365, we understand that sometimes you just need a little guidance to get started. For this reason, we’ve put our most popular templates together in simple packages, to suit a variety of your startup needs. All the templates also include notes that explain important clauses, so that you can get to grips with what key terms mean for your business.

    Launching a startup is an exciting time. Enjoy peace of mind knowing the legalities are taken care of, so that you can focus on enjoying the ride and growing your business.

    The team would love to hear about your business ideas, and they can guide you every step of the way – so that you avoid risk and can focus on growing your company. To find out more about how we can help, get in touch here.

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