You have an innovative, perhaps even ground-breaking idea. Maybe you are also lucky enough to have a co-founder or have secured substantial investment and are about to go ahead with the start-up dream….but STOP. Do you know the legal implications or requirements that you should be taking heed of? Unbelievably, many young businesses move forward founding a business without consulting a solicitor. Simple mistakes that were made in the early days can become the very reason that yours business fails; Peterborough based law firm Taylor Rose offer to cast some light on the shadowy areas of business law that you should be aware of!
Co-Founder deals
It is critical that a clear, concise agreement is made among the founders of a company at its birth, think of it as a business pre-nuptial agreement. The co-founder agreement needs to address vital factors such as ownership of percentages including what happens to the percentages based on future participation, both critical areas of business law.
Treat some areas of the co –founder agreement as if it were an employment contract. Time commitments, roles and responsibilities expected from each founder is an area that is commonly over looked, clear standards and expectations should be laid out in writing to ensure no future clashes are hard. It also ensures a certain level of trust and respect.
Salaries and future increases feature highly in co-founder agreements for obvious reasons, having definitive benchmarks for when it is viable to increase salaries.
In true ‘pre nup’ style, it is important to discuss and put into writing during the early days, precisely what is to happen if one founder is to leave. This creates a sense of security and confidence that no nasty surprises can arise during this common situation.
Employment Law
Were you aware that even a verbal job offer is legally binding? Many aren’t aware, but verbal contracts can be upheld just as far as a written one – this means even that you must be very clear, even at interview stage, when a job is and is not being offered.
A job offer contract should be conditional, and subject to employee suitability; be sure to check proof of right to work in the UK and references. Recently we at Taylor Rose have come across a large number of start-ups who aren’t looking into references. Being aware of past performance and personality traits will enable you to pro-actively plan the effective management of an employee and give you an objective view. You don’t need to stick to the specific references that are provided, opt for around 5 references to get a clear, well rounded idea of the potential employee and choose senior figures and colleagues.
Be sure to provide the employee with a thorough set of terms and conditions of the employment contract at the very beginning, because altering them at a later date without consent could leave you in breach of contract. Millennials are an extremely savvy bunch and will take their time to read the conditions of their employment – far more so than the generation before them. If changes to the contract does not benefit them, you could very well find yourself being landed with a business law suit.
Many young companies are not sticking with traditional working hours and office environments, we understand this – the game is changing. However, it is in your best interest to lay out the number of hours that the employee is required to work each week – be aware that the maximum average working week is 48 hours, although an employee can voluntarily agree to dismiss this rule (if so, obtain this in writing).
After 26 weeks, all employees have the legal right to request flexible working, and you as the employee are legally obliged to consider and discuss each request with the member of staff.
Another important part of employment law is salary; from the 1st of October this year, minimum wage has been increased to £6.70 for those over 21, and £5.30 for those aged 18-20. Please be aware that you are legally required to provide every employee with a detailed wage slip each month.
Intellectual Property Protection
As soon as you have created something unique to your business, whether it is literary, artistic work, music or a discovery – it needs to be protected. In this digital and innovative age, unique discoveries and pieces of work are being created every single day and there are a number of ways to protect them if you know which areas of business law apply.
Non-disclosure Agreements are often made between vendors, outsourced or subcontracted work and can even be written into employee contracts and should be a critical part of any business venture. It is very important that you clearly identify the information and activities that are considered confidential because if the range of information is too vague the agreement can be rendered unenforceable.
Other well-known ways of protecting your creative work are in the form of–
Patents; In brief, a patent generally applies to a product or process that have a functional purpose. A patent gives the creator or inventor a monopoly over the invention for a period of 20 years before it is available to others. There is much more criteria before a patent is granted and it should be researched in depth.
Copyrights; commonly applied to musical, artistic, literary and published work and filmed work. Copyright is an automatic write that exists when the work is created that usually belongs to the creator of the work, so be sure to included copyright clauses when you are using sub-contractors or freelancers. The length of copyright can be anything from 25 years to more than 70 years depending on the country it was created and the type of work.
Trademarks; a trademark will protect the brand, including its name, image or products and services. It will also enable you to take legal action against anyone that uses the brand without seeking permission. A trade mark must be registered with the government and will last for a period of 10 years, and like a patent, there is criteria that you will need to qualify for.
Of course, there is a plethora of information available online for areas of business law that apply to young businesses and there are also templates for the various contracts that you may want to implement. We urge business owners and entrepreneurs to seek the advice of professional solicitors to ensure that they are aware of the laws and legal requirements that applies to the nature of their business and make sure that they protect their business in every way possible.
