Setting up a startup starts in a burst of creativity and ambition however oftentimes newfound entrepreneurs become daunted by the sheer weight of regulations, bureaucracy and contracts-contracts-contracts that need to be dealt with before the pen-and-paper idea takes its shape and form. Unlike a 100-metre dash, this process is a marathon and the key work ethic to have is consistency, endurance, and due-diligence.
Just as much as the tech and innovation aspect of a startup is important to define, its backbone is to make sure that all its legal bases are covered, and its launch is not haphazard. We know that legal matters can be daunting and unnecessarily complicated, so we’ve created this definitive legal checklists best suited for startups.
- Choose your Business Structure and Register your Startup
Your baptism into the legal work you have to do to establish your startup and that comes from first having to decide the structure of your company. Think of this as having to come up with a constitution of how your company is run, as if it were a country. How are decisions made? What happens in the case of resignations?
Are you the sole proprietorship? Is it a limited company or a corporation?
Depending on how you structure your startup, there’s different tax and hiring implications that will significantly affect your growth to investing potential.
After that’s all decided, it is important that your startup does not operate as an unregistered entity. Cyprus has a very quick, accessible and cheap registration system at the Registrar of Companies and DPLaw offers full corporate support from the very beginning to help you commence your startup’s journey as smoothly and swiftly as possible.
- Create a separate bank account
As soon as your company is registered, you can start operating more confidently as a registered entity. One of the initial benefits to that is the ability to open a separate bank account for your startup so as to not commingle your business funds with your personal funds.
This separates and protects your personal assets and financial information from ever being part of a future lawsuit. Or from having to be shared to future business counterparties such as landlords, lenders, or investors.
It comes without questioning, opening a separate bank account for your startup is beneficial to your liability, privacy, and to your general ease of use.
- Sorting out your Taxes
Unlike traditional companies, startups are marked by their bursting growth and earning potential which eventually will attract the watchful eye of the tax man.
The type of business structure you’ve chosen to operate under can influence this. However worry not, our legal professionals are here to help you out in understanding which tax regime best suits you and how to keep up with all your tax obligations.
- Get your Intellectual Property Protection ASAP
A startup’s IP is its bread and butter and ignoring it as you start can result in major legal and financial troubles down the line.
Too many startups have found their innovative ideas copied and resold by competitors who ended up making millions profiting off IP that was not protected. Whether what you need is trademarks, patents, or copyright protection a simple due diligence early on could save the business in the long-run.
- Have an NDA at the ready
NDAs, shortening for Non-Disclosure Agreement, may soon become standard practice with every contract you enter as a startup. In the tech industry, startups rely on the novelty of their innovation and NDAs will be the all-too-necessary shield to protect it from predators and exploiters.
An NDA gives you the assurance that the startup’s confidential information is protected from being shared to the public (or to a competitor) because of the serious legal implications the disseminator will face.
As a startup, you’d soon come to see that an NDA will be important to be attached to almost every agreement you enter whether it is with investors, employees, counterparties or manufacturers.
- Employment Contracts and the likes
To piggy-back from the above point, although startups first embark as a one-person venture or as the project of a close-knit small team, soon enough with its growth, the question with regards to employing individuals into the startup will come up.
You’d need to consider whether outsourcing, or hiring contractors, or employing is the best suited option for your business. All three options require separate agreements, each with separate benefits and obligations that need to be taken into account.
- Are you licensed?
Oftentimes overlooked, licenses are a necessary bureaucratic hurdle that needs to be dealt with before any operations begin. It is vital to check whether your startup product and services do not require any kind of operating license, and if they do, which one. Operating your business without a license will result in massive fines that could ultimately impede your startup from ever taking rise.
- The Holy Trinity: Privacy Policies, Disclaimers, and Terms of Services
Although commonly joked as the wall of text that nobody reads, these three all-important legal documents could pinch you out from an unnecessary lawsuit that could have otherwise been easily avoided. A good and meticulous set of privacy policies, disclaimers and TOS help dictate the relationship between you and anyone you deal with as well as limit your liability in case something goes wrong with your products or services. As much as you can, a diligent startup should have these plastered everywhere.
- Manage your accounts and stay organized
The smallness and youngness of a startup should not justify mistakes in bookkeeping organization and management. Startups businesses are separated from normal businesses because of their massive and explosive growth. Therefore a reliable organization of documentation will help provide the sturdy foundation that will assist in the uniform and stable development of the startup.
Tax records, financial statements, invoices, contracts, investment funding, confidentiality agreements, all are necessary to be stored safely and in accessible formats.
A lot of legal aspects are involved when starting out and operating your startup and although this checklist covers the most common and important items, depending on the particularities of each startup, there may be more complex and practical issues that need to be tackled.
DPLaw is well experienced in assisting and supporting businesses, particularly in the tech industry, and can guide you through all your necessary legal obligations. We can help with all the above checklist items among others. Our ethos is to be swift, personalized, and diligent. We make sure everything is meticulously handled at prompt speeds and to anticipate and prepare you for any future challenges and needs.