One of the most significant areas a start-up sometimes ignores is selecting a lawyer for their business. Though there are costs associated with any service, the costs of choosing not to have legal guidance from the start can be more costly in the end. In many cases, we have found that clients who didn't have a lawyer in the beginning and call for a referral will be disappointed to find out that they might be out of luck because they did not pursue proper legal guidance upfront.
Suppose a start-up plans to incorporate its business. In that case, they might benefit from a corporate lawyer's help to set up the proper structure for the company and ensure all of the paperwork is filed correctly with either the province or federal government, depending on provincial or federal incorporation. They can also keep your minute book up to date, as this is something many businesses overlook.
We have found that the most significant legal issues exist within small businesses with more than one shareholder that does not have a shareholder's agreement. Too many small businesses involve friends and family members who feel there will never be a dispute until there is one. A shareholder's agreement protects every shareholder, especially when marriages break up, a partner passes away, or conflicts that cannot be repaired. The agreement lays out precisely how things will be handled in the case of any of the above events and lay out roles and responsibilities.
Too many small businesses feel they do not need to have contracts developed by a lawyer for their business and can pull one off the internet and use them. There is a saying that "good paper makes good friends." In many cases, taking a contract off the internet can be worse than not having one. If you are not knowledgeable about the law in your jurisdiction, the contract you have may not be relevant in the least to your business. What kind of contracts should you have developed?
- Non-Disclosure Agreements - This is a written agreement between 2 parties that prohibits sharing of confidential information shared.
- Order or Service Agreements - Whether you are selling a product or a service will determine what type of agreement you need between you and your customer. You cannot settle disputes between you and your client without a written one that protects both parties. A handshake agreement, in most cases, will not hold up in a court of law.
- Employee Contracts - If you have employees, you need employment contracts. They protect not only the employee but your business as well.
- Supplier Agreements - If you are dealing with a small supplier, they may not have contracts that outline the terms between you and their business. Most large suppliers will have contracts you will want your lawyer to review.
- Distribution or Partner Agreements - If you are having someone sell your products or services or you have a partnership agreement such as a marketing agreement, you will want to spell out the terms and responsibilities within the contract.
The type of contracts needed depends upon the type and structure of your business. You will need to understand your requirements before looking for a corporate lawyer for your business, as some specialize in specific industries or disciplines. For example, not all corporate lawyers can write a distribution agreement for a high-tech company. Also, many corporate lawyers focus on larger businesses, so it is essential to find a firm that will meet the needs of your business.
As I was writing this article, I received a newsletter from the law firm that we tend to refer clients who need many of the services above. They also happen to be the law firm we have used when required. They focus on small businesses and start-ups and saw an article this month on How to Choose a Start-up Lawyer, which is an excellent article to finish this one.
Choosing the right lawyer for you and your business is essential, and this article by Lucas Driedger at Caravel Law provides a good segue into choosing a lawyer for a start-up or small business.
