10 Legal Mistakes Small Businesses Make and How to Avoid Them

10 Legal Mistakes Small Businesses Make and How to Avoid Them

PRESENTER: DOMINIC WOOLRYCH

10 LEGAL MISTAKES SMALL BUSINESSES MAKEAND HOW TO AVOID THEM

DOMINIC WOOLRYCH

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10 LEGAL MISTAKES SMALL BUSINESSES MAKEAND HOW TO AVOID THEM

“Starting companies is a lot like launching rockets: if you’re a tenth of a degree off at the launch, you may be a thousand

miles off downrange”

- Craig Johnson, The Silicon Valley Edge

20 - 50 New Businesses and Startups each day

What are the 10 most common legal mistakes?

AGENDA

1. Not Performing Initial Searches

Initial Searches for any New Business:

Check identical names with ASIC

Check name with IP Australia

Check domain with Go Daddy

Google it

1. SEARCHES

Business Name – ASIC

https://connectonline.asic.gov.au/RegistrySearch

1. SEARCHES

Trademark Check – IP Australia

http://www.ipaustralia.gov.au/get-the-right-ip/trade-marks/search-for-a-trade-mark/

1. SEARCHES

2. Neglecting the Non-Disclosure Agreement

What is a Non-Disclosure Agreement?

A non disclosure agreement (NDA) is used to safeguard a business’s confidential information. It is used when a business or individual wants to disclose confidential information and make sure that the confidential information does not fall into the wrong hands.

2. NDAs

When to use a Non - Disclosure Agreement?

Talking to investors

Talking to potential Co-founders

Speaking to developers / designers

Talking to potential employees

2. NDAs

NDA Basics

One way v mutual

Only effective is signed

Complete before you share information

Take additional steps to protect your ideas

2. NDAs

2. NDAs

3. Not Being on the Same Page as Your Co-Founder

3. CO-FOUNDERS

“Your business is twice as likely to succeed if you have a Co-founder”

Study done by founders.com

3. CO-FOUNDERS

Issues that need to be addressed

Here are the key deal terms you need to address in some kind of written founder agreement:

Who is officially involved

$ Capital

Roles and responsibilities

Equity

3. CO-FOUNDERS

4. Copying & Pasting Online Terms From Another Website

Privacy Policy

What is a Privacy Policy?

Do I need a PP?

What is ‘confidential information’?

New 2014 Privacy Principles (APPs)

4. ONLINE TERMS

Terms and Conditions

What are Terms and Conditions?

Do I need T+C’s?

What must T+C’s include?

4. ONLINE TERMS

Terms of Use

What are Terms of Use?

Do I need Terms of Use?

What must Terms of Use include?

4. ONLINE TERMS

Do I need a Lawyer?

Meet Lexi!

4. ONLINE TERMS

5. Failing to Manage Intellectual Property

What is Intellectual Property?

Intellectual Property (IP) is a term that describes the application of the mind to develop something new or original. IP can exist in various forms; a new invention, brand, design or artistic creation.

5. INTELLECTUAL PROPERTY

Intellectual Property

Who built your website?

Designs / Content

Assigning IP

Investors

5. INTELLECTUAL PROPERTY

Problem 1: Moonlighting problem

If you work on your startup while currently employed by another company, your employer may have rights to your intellectual property/invention

5. INTELLECTUAL PROPERTY

Problem 2: Zuckerberg problem?

IP is not assigned to the company by the founders and/or third-party developers (including foreigners)

5. INTELLECTUAL PROPERTY

6. Incorporating a Company at the Wrong Time

TYPES OF STRUCTURE1. Sole trader2. Partnership3. Company4. Trusts

WHY A COMPANY IS THE BEST STRUCTURE

5. Risk (Corporate Veil)6. Tax7. Entering into contracts8. Investors9. Disputes10. Equity

HOW TO INCORPORATE1. Online – providers use ASIC software2. Directors / Secretary3. Shareholders4. Share allotments5. ABN / TFN / GST

”Don’t incorporate a hobby. Incorporate when you are serious about making your startup a business”

6. INCORPORATION

7. Issuing Equity Without Vesting

Problem:

2 founders start a business, each gets 50% of the business. After 6 months one of the founders leaves and wants nothing to do with the business

What happens?...

7. VESTING

Solution = Vesting Schedules

Vesting

Cliffs

Acceleration

7. VESTING

7. VESTING

8. Thinking Boards are Only For Large Companies

Advisory Board

Never to small for an Advisory Board

Surround yourself with experienced people

Offer small amount of equity

Great for networking

Easy to appoint

8. ADVISORS

9. Hiring Staff Without the Correct Contracts

You must have written agreements for all of your employee or contractor.

Factors to consider:

1.Control

2.Independence

3.Risk

4.Separate business entity

5.Delegation

6.Tools and equipment

7.Terms of contract

9. STAFF

Need some help?

9. STAFF

10. Using the Wrong Lawyer

Things to consider:

Find the right Start-up / small business Lawyer

Fixed Fee – Pricing (get quotes up front)

Don’t give them equity

Talk to other Start-ups – see who they have used

10. LAWYERS