New Zealand has a rich and vibrant start-up culture – the entrepreneurial spirit, and ‘can-do’ attitude, just seems to be ingrained in our DNA.
Starting a business is an incredibly exciting undertaking but, for many, it’s a daunting prospect. Setting aside any commercial concerns, there are a host of legal issues which, if not properly considered and addressed early on, could prove to be unwelcome stumbling blocks down the track.
Here are a some of the key legal issues that start-up business owners should turn their minds to, and take legal advice on, before diving in:
Legal structure and compliance: What legal structures are available for the business to adopt (i.e. sole trader, partnership, company etc), what are the pros and cons of each structure, what are the tax implications of adopting a certain structure over others and what, if any, ongoing compliance obligations will apply to the business going forward?
Governance documentation: Depending on which legal structure the business adopts, is there appropriate governance documentation in place to regulate the relationship between the business owners and the business, and the operation of the business itself (i.e. a constitution, a shareholders’ agreement, a partnership agreement etc)?
Funding: Has the business fully canvassed all fund-raising avenues available to it in order to launch and sustain the business, and also the pros and cons and applicable regulatory framework associated with each option (i.e. shareholder advance, bank loan, issuance of shares, government grant, equity crowdfunding etc)?
Intellectual property: Are appropriate protections in place for the business’s intellectual property (i.e. trademarks, patents, designs, copyright etc)?
Customer/supplier arrangements: Does the business have a specific set of terms and conditions upon which it wants to trade and, if yes, have they been documented and agreed with counter-parties (i.e. terms of trade, supply and distribution agreements etc)?
Employment: Does the business employ any staff and, if yes, on what basis are they employed (i.e. employee, independent contractor etc) and are appropriate written agreements in place with those staff members (i.e. employee, independent contractor agreement)?
Regulation: Does the business operate in a regulated industry and, if yes, are there any regulatory conditions that must be met before the business can legally commence operations (i.e. registrations, consents, licences, permits etc)?
Premises: If the business operates from specific premises, what arrangements (if any) are in place for the use of those premises by the business (i.e. lease, licence to occupy etc)?
This is just a snapshot of some of the key legal issues start-up business owners should be mindful of. Engaging a lawyer early on to advise on these issues is a crucial step towards start-up success.
The above overview has kindly been provided by Andrew Comer, a Principal at law firm of Stace Hammond. It has been provided for general information purposes only. It is not, nor is it intended to be treated as, legal advice and is subject to change without notice.
Andrew specialises in corporate and commercial law and regularly provides advice in relation to start-up companies, mergers and acquisitions, joint ventures, capital raising, commercial contracts, corporate governance and company secretarial matters.
Stace Hammond is a New Zealand law firm with offices in Auckland, Hamilton and Tauranga with legal expertise in the areas of business, finance, corporate and dispute resolution.