3 Legal Issues A Startup Founder Has to Handle From Day 1
I am the type of person who is a total sucker for referrals. This is not news because over half of the population would rather ask for a referral about a product of service they need to address the particular need they have. And for businesses, according to Forbes referrals comes second in quality leads for any transactions. So of course before I could engage in legal person to support us at manyactive app on matters legal, I had to ask around from trusted sources on the ecosystem. I received some quality leads and had lengthy conversations with them to gauge their understand of the startup scene and legalese surrounding startups in particular (because legal looks different in a startup compared to a traditional company).
Through these candid conversations, I learned a thing or two that I think were really critical to me as a founder. The startup landscape is already intense as it is without having to worry about legal but learning about these three things set me on the right path from day 1.
- Memorandum Article of understanding
For most of us whose government is trying to make strides into the digital transactions era, we are lucky enough to not have to deal with government bureaucracy when it comes to registering a company. Therefore you find that most documents which would in the past need a lawyer to draft for you to register a company like the memorandum of understanding is now provided for in the system and thus you can just use the standard document auto generated in the system. While this is convenient and easy, there is a problem in using it especially for startups. The memorandum as a legal document is used to stipulate the operations of the company and how scenarios should play out in various circumstances. For example; if a board member behaves in a certain way, the consequences are.. Or if a share holder wants to sale their shares, what steps must be followed.
2. Employee Equity Option
Unless your organsiation is the next google and you are funded form day one, as a startup your equity is your currency. To attract top talent, advisors etc you will have to part with some equity. Figuring out earlier on how much shares one will designate to their employees or other parties whom will contribute to the growth of the startup from time to time is imperative.
3. Data Protection
It goes without saying that we are in the era where data is king. As we continue to rely more on technology to literally perform every task in our life (with few exceptions), we are continuing to put out huge amount of data into the space and this makes us more vulnerable. Securing your customers, shareholders and employees data should a priority form day 1. This means that you ought to take care of your privacy and cookie policy and terms very seriously
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