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Lay down a good legal foundation for your venture from the beginning

October 15, 2012

Here is a real story about a friend of mine: He developed a business plan and helped a startup secure a good deal with venture capitalists, but then got kicked out by investors and other founders without any shares in the venture. He couldn’t sue them since he had never signed a shareholder agreement.

Unfortunately, cases like this are not a rare thing in the startup world—no matter if they’re related to partnership, intellectual property (IP) or contracts. People have a misconception that legal matters are still far away, requiring attention only when their businesses become large companies. As a matter of fact, you should build a good legal foundation for your company from the very start.

During last Wednesday’s Entrepreneurship 101 lecture, Arshia Tabrizi, managing partner of Tabrizi Law Office P.C., talked about building an entrepreneurial ecosystem and the legal fundamentals for startups.

Arshia went over the three legal aspects usually involved with startups:

Incorporation

Incorporation is necessary to avoid personal liability for your business and to take advantage of tax laws, centralize IP and acquire venture capital. You can either incorporate online or find a lawyer to incorporate your business. A shareholder agreement is a key document for incorporation. Kind of like a prenuptial agreement, it helps regulate a corporation’s governance.

Intellectual property

There are many ways to protect your business’s IP besides patents, including trademarks, copyright, trade secrets, non-disclosure agreements (NDAs) and more. Each kind has its own applicable situations. Watch the video below to learn more about them and to understand the tricks associated with using them.

Contracts

In the business development process, you need to deal with people, including customers, contractors, employees, partners, investors and others. When dealing with all of these stakeholders you will need certain legal documents—forms of agreement, letters of interest, memorandums of understanding or even just emails—to avoid legal issues in the later stages of business.

Start thinking about the legal framework for your startup by watching Arshia Tabrizi’s lecture in the video below.

Here are some other resources that might be useful for you

 

Forgot to take notes? Here is a sketch note shared by attendee Sachua Chua.

Want to connect?
Join the Entrepreneurship 101 LinkedIn Group.
Follow the conversation on Twitter: #ent101.
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Download the course schedule.

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Lily Liu @ MaRS

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Lily works as the Manager - Educational Programs at MaRS, providing entrepreneurs across Ontario with intensive entrepreneurship training.

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