If you postpone legal obligations today, you might not have a company tomorrow. Trust me, I've seen too many startups fall into traps that could have easily been avoided if they just had the right legal structure in place early on. You shouldn’t wait till you get in trouble, you should set yourself up for success from the start.
Many founders get in trouble with co-founders, investors, or regulations, all because they failed to put suitable systems in place from day one.
As a startup attorney and founder, I’ve witnessed too many promising businesses crumble because they neglected their legal foundations early on. It’s frustrating to watch, especially when these issues could have been avoided with proper guidance. The lack of attention to legal structure and governance ends up affecting not just the startups themselves but our entire tech ecosystem.
In this article, I will outline why having the proper legal framework from the start is crucial for your startup’s survival. I’ll also highlight key areas founders must focus on to build a sustainable, legally sound foundation to protect them as they grow.
Why you need a lawyer – benefits and consequences
Let’s get one thing straight. Legal isn’t expensive. The absence of it is. As of 2017, small companies spent an average of $5 million to settle internal and external legal disputes.
The benefits of getting your legal foundations right are huge. It’s like getting a baby their vaccinations. No one waits until their baby is sick to start thinking about immunisations.
In the same way, your startup needs its “immunisations” early on to protect it from the diseases that will inevitably come later—whether that’s disputes with co-founders, investor issues, or regulatory hurdles. If you miss that window, you’ll end up spending far more time and money trying to fix problems that could have been avoided altogether.
Without proper legal structure, you risk everything. One misstep could cripple your business, leaving you tangled in unnecessary lawsuits or regulatory problems. And when that happens, trust me, you’ll wish you had sorted things out at the beginning.
I see lawyers as vitamins, not painkillers. Your lawyer isn’t there just to handle problems after they arise; they’re there to prevent those problems from happening in the first place. You would have a solid foundation so that when the challenges come, and they will, you’re prepared.
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When to get a lawyer
So, when do you need to get a lawyer? From the onset. Don’t wait. If you’re serious about building a business, you should start with a lawyer in your corner from day one.
The law says you’ve got to register your business within 28 days of commencing operations, but it goes beyond just ticking that box. Legal issues can hit you at any moment, and without the right structure in place from the start, you’ll be scrambling when they do.
A good lawyer can help you avoid common pitfalls by guiding you through crucial decisions early on. Here are some of the key areas where legal advice is indispensable:
- Type of entity: Decides whether you should register as a limited company, sole proprietorship, or partnership, shaping your legal and tax obligations.
- Shareholding structure: Helps determine how shares are distributed among founders and investors, impacting control and ownership of the company.
- Initial directors: Guides you on selecting the right people to steer the company, ensuring governance and decision-making are on solid footing.
- Licencing and permits: Ensures your business has the necessary legal permissions to operate within your industry and jurisdiction.
- Intellectual property protection: Helps safeguard your ideas, products, and brand through trademarks, patents, and copyrights.
- Contracts and agreements: Drafts legally sound contracts with co-founders, employees, and partners to protect your interests and reduce risks.
- Regulatory compliance: Ensures your business follows all necessary legal and industry-specific regulations, avoiding penalties or shutdowns.
Keep in mind that the above areas are not exhaustive, as the ecosystem evolves, new opportunities and challenges will also come to the fore and these will require legal solutions or advice that will help you navigate the uncertain waters.
Who should you get for legal advice?
Now who you get is important. Not all lawyers are the same. Law is like medicine—you don’t go to a general practitioner for brain surgery. You need a lawyer who understands startups, technology, and innovation.
Don’t make the mistake of thinking your neighbour’s friend who is a lawyer is good enough. It’s not just getting a lawyer; it’s about getting the right one. A lawyer who knows the ins and outs of the startup ecosystem will help you avoid the pitfalls that could sink your business.
Many founders try to save money by using a family friend or someone who’s “cheap”. But cheap advice can be costly in the long run. You want someone with experience, someone who knows your market, your challenges, and how to navigate them.
How to find the right lawyer
In today’s digital world, finding the right lawyer is easier than ever. It’s not like 20 years ago when you had to sit in a lawyer’s office for hours just to get advice.
Now, you can find top experts on LinkedIn or via a quick Google search. Shoot them an email, book a consultation, and get things started. A good lawyer will be able to understand your vision and guide you accordingly.
And don’t just look for someone who can draft agreements. Look for someone who can guide you on the structure you need, and who can see the road ahead and help you plan for it. A real startup lawyer will act like a partner in your journey, not just someone you call when things go wrong.
What you need at the early stages
In the early stages, you need to get clarity. Your structure, your agreements, your intellectual property—all of it needs to be sorted. Do you know how many companies have had to reincorporate or restructure because they didn’t get this right the first time? Too many.
Start with your legal structure—what kind of entity are you creating? What’s your shareholding like? Do you need licenses? What’s your brand protection strategy/intellectual property situation? These are foundational questions. And then, you need to think about your internal structure. How are you handling employment contracts, advisory boards, AGMs, and compliance with statutory regulations?
Having a lawyer on board ensures that your business doesn’t just survive but thrives. Because once you start raising funds, or bringing on partners, those foundations are going to be tested. And you want to make sure they’re rock solid.
Building a startup is hard enough without adding legal headaches into the mix. Get your foundations right from the start, and you’ll save yourself a world of pain later. Invest in a good lawyer early on, one who understands your vision and the ecosystem you’re working in. It’s the most important investment you’ll make for your startup’s future.
