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Understanding the Legal Issues Surrounding Your Startup

This article is written by Munira Hussein, a Contributor Author at Startup Istanbul.

There is such thing as a startup expert. It is great for startups focus on the product, market and investors for their business but it is even more important for you to have an idea about the legal aspects of your startup. It is one faculty that you cannot try and be creative with. What you need is a trusted expert to advise you accordingly in order to safeguard your interests and the interests of your business.  Anil Advani is the managing partner at Inventus Law Firm. Speaking at the StartupIstanbul conference, he shared insights.

The legal aspects of businesses in various countries vary. However, any startup stands a higher chance of succeeding in the United States of America than it does anywhere in the world unless the product is limited to a particular locale.  If you are outside of the US and is keenly eyeing to set up your business here, there are a few ground rules.

Actually, it is advisable that you make that deliberate decision to start up in the US. This is vital if your anticipation is to have a successful global product.  This also eases acquisitions, gives you an easier access to investors, allows you to compete at a high level because of the product and the location and it picks up and grows faster.

Often times, your partners are your friends and you think that a solid legal document is unnecessary since you understand each other. Wrong! For the sake of your business and the safeguarding of your interests, put your friendship aside and be people who are in business. When you get into legal fights because of unclear terms of engagement at the beginning, you will scare away investors and what is your business without investors?

Refrain from doing the 50-50 or 1/3 each in case you are a group of tree. Allocate shares based on the input in terms of finances, time and the productivity of the time put in by your co-founders or partners. Be fair in your allocation of shares. Fair does not mean equal. It only means that you get the value that you put into the business.  

Pay attention to the basic stuff

 Learn the simple things like your rights, what you need when negotiating with the big banks or acquisitions. This is with the belief that you have in mind, the end for your company even as you start out. 

Learn how the legal documents are structured and Structure your founder agreements and stocks properly.

Understand what happens when someone leaves the company, for example a shareholder. You must surely know that at some point, someone might want to leave. 

The summary of it is that you should not overlook anything in regards to legal matters. Imagine if you become an overnight success but because of the paperwork that you didn’t do, lose everything you had anticipated! It could happen. Don’t let it happen.

─ May 4, 2020