February 27, 2017
Originally posted 2016-10-11 11:39:25
By Sindy Ding-Voorhees | www.amdlawgroup.com
Startup founders usually have fundamental strengths at some aspects, such as design, pitching, managing, etc., and yet also have weaknesses. Corporate law is something that is usually considered as a myth and a weakness for a lot of entrepreneurs and start-up owners. The concept of “entrepreneurship” is not just about pitching and managing, but the core of it is relationships.
Good relationships you want to nurture are with multiple parties:
• Attorneys, who you must nurture a close, reliable, comfortable relationship with, the attorney can help you get started, under legal protection, and guide you towards the right directions;
• Friends and families, where the initial funding usually comes from before getting investments from other sources;
• Incubators (think about the show “Silicon Valley”!)
• Co-creators (…and think about Marc Zuckerberg’s story in the film “Social Network”!)
• Mentors (free advice!)
• Customers!! At any time, startup owners need to be clear about who are their customers, even more clear than how they understand their technology.
When you are ready, it’s time to sit down with a corporate lawyer to discuss your idea and plan! Usually, four components a corporate lawyer can help a startup owner walk through, and those are also the key aspects for any business owners to consider and focus when they start a legal consultation with a corporate lawyer. They are: 1) Plan of Idea development and protection; 2) Funding plan; 3) Execution plan; 4) Exit plan.
By discussing the four main issues with the attorney, as a startup owner, being able to understand the value proposition of your business will be tremendously helpful for the conversation and will ultimately drive the business to success.
Value proposition is crucial when a startup looks for VC investors. An investor who has common value and emotional bond with the business of the startup will lay a good foundation of the investment. Understanding the value proposition is core for the funders especially at the stage of funding and execution. To think about the market control, or which component is the value proposition for your business, depends on different nature of different start-ups, for example: real estate investment vs. wearable technology related business. The market control is different.
Once you have a clear picture and goal of your start-up, then a good corporate lawyer will be ready to address your issues starting from two main questions:
1. What kinds of documents does the client need to complete and when do they come in at different stage of the business?
• The attorney will advice the client not to share his or her idea in a very explicit and descriptive way on social media, because that will probably disclose a certain kind of technology that soon could be your patent.
• The attorney will also help you structure the business in the way that you want, either a C corp, a S corp or LLC business types. After figuring which business type is right for the business owner, the attorney will guide you to select a state in which you will incorporate. At this point, several factors will weigh in, such as considerations of liabilities, taxation, and cost issues.
• The legal services for a startup involves a series of legal operations, not only corporate law basics, not also intellectual property law, especially for some technology based start-ups, employment law, contract law, because usually multiple contracts with multiple parties involved will have to be carefully drafted in order to build a good foundation of relationship.
2. From aspect of cost, what is the best, primary, optimized option for the client?
• A good corporate lawyer should not only provide the client with answers to the questions, but also come up with options for the client. How to efficiently and economically structure the business for the startup owners based on the team size, funding channel, core value proposition, etc., worth a lot of thinking. That depends on the experience and understanding of a certain industry (such as fashion, technology, lifestyle), very patient and active learning about the business owner’s personality and the company’s characteristic, and the best judgment from a standpoint of the client’s best interest.
If you have an extravagant, extraordinary or exclusive idea and intent to team up and be your own start-up boss, or your business is at a stage of looking for funding channels or legal support in terms of intellectual property, corporate formation or overseas strategies, visit AMD LAW at www.amdlawgroup.com or start a conversation with us by firstname.lastname@example.org.