Legal Services and Start-ups

Monday, February 8, 2021
By: Raz Toor, Lawyer at Falcon Law PC

We’ve heard it before time and time again – you’re a start-up and you’re in a time crunch and a budget crunch. You’re looking around for things to axe and one of the first is quality legal service. Maybe you’ve opted for an internet based service provider offering templated forms and generic advice or maybe you’ve opted out of legal service entirely – neither option is satisfactory for a business growing at rapid speeds, establishing itself in its respective market, and dealing with several moving parts, including employees, technology, and financing.

We discourage any start-up from venturing ahead without quality legal service, despite the perceived expense. Down the line, you may find yourself embattled in disputes and other legal concerns which can easily be more expensive than having quality legal service from the get-go. The concerns are many – do a quick Google search and you’ll find many founders caught in legal disputes over the ownership and management of their start-up. Likely is that the same founders did not prioritize quality legal service when launching, which could have assisted them in avoiding such disputes. Had the founders turned to a lawyer to prepare a founder and/or shareholder agreement and put in place other safeguards to prevent disputes, the founders may have found themselves at more amicable terms with each other.  

To avoid being the disputing founders or otherwise, a legally troubled start-up, here are some things we encourage you to discuss among stakeholders and legal advisors:

1. Shareholder Agreements – If you’ve incorporated and you believe that you’re legally protected – you’re wrong! Provincial and federal corporate legislations are not tailored to the particular needs and wants of start-ups and their shareholders. All shareholders are encouraged to negotiate shareholder agreements to establish custom rules and regulations for their corporations, some examples being: capital contributions, non-competition, and shareholder and director duties. Let’s say your fellow shareholder has decided to halt financial contributions to the start-up – yes, you may pursue litigation to encourage this shareholder to pick up his or her fair share of the business or you could have prevented this issue altogether, by drafting a clause to this effect in a shareholder agreement.

• Intellectual Property Rights – We’re sure that you’re hard at work developing your technologies, software and hardware, and other novel creations which form the foundation of your start-up. However, have you considered that intellectual property rights vest in all such creations and such rights should be contemplated in written agreements. Let’s assume you’ve retained a website developer to produce your mobile application – did you know that the intellectual property rights to the mobile application may vest with the developer (also, the author). It is important that an intellectual property agreement is executed with the developer so that the intellectual property rights in the mobile application are assigned to the start-up.

• Employment and Human Resources – A high growth business such as a start-up usually means many helping hands; helping hands mean many employees; and employees mean several legal concerns. It is prudent to establish payment structures, rights and responsibilities, and other considerations pertaining to employees in employment agreements, which include stock option agreements. This provides both parties with the certainty as to the terms of the employment relationship and can be relied upon in the event of a dispute. Further, workplace manuals and handbooks are recommended to foster a workplace environment that is legally sound and in line with the start-up’s ideals.

Turning back to the point of expense, quality legal service doesn’t always have to be expensive.  At Falcon Law PC we provide our start-ups with flat fees, bundled packages, and cost-effective legal solutions. As an example, we offer start-up bundles including incorporation, a shareholder agreement, set of by-laws, and digital minute book, to get our start-up clients off the ground running. Paired with cost-effective pricing, we offer our start-up clients the convenience of digital legal services. We are a digital (or virtual, if you prefer) law firm offering legal services through the power of the internet. This allows our tech-savvy and time-conscious start-up clients the ability to meet us wherever and whenever all through the click of a button.

We look forward to assisting you with your start-up legal matters – including shareholder agreements; intellectual property rights; and employment and human resources. Our team can be contacted at 1-877-892-7778 or info@falconlawyers.ca.