You better take a lawyer with you!
Following a few precedents where attempts to launch a startup company ended in spectacular financial success but later led to long-drawn-out legal battles, it is now clear that you cannot establish a startup without legal consultation from a lawyer specializing in this field, who is familiar with all legal and business subtleties and who can correctly lay the foundations for any such enterprise.
This is even truer when you do not even know the full range of services required to launch a startup, or how to anchor it with valid legal agreements and a fair and correctly prepared contract. Planning to launch a startup company in the 'Startup Nation'? You better take a lawyer with you. You actually must.
It begins with an idea and ends with an exit
Sometimes, a successful creative concept starts by thinking about your concept without thinking about the end results. Maybe this is necessary to start the wheels going and keep the creative process clean of nonproductive thoughts, but at some stage, you have to get practical. A startup company, by the very definition, is designed to expand and reach as many people as possible, and since it involves so many people, there are many questions you have to answer first.
You have to define the fields of responsibilities of different people. What are the intellectual property rights of each person in their contributions to the project? Who owns the trade secrets and copyrights? How can you register your trademark without getting into trouble with similar trademarks? Who will assume legal and financial risks, and how do you divide duties and profits? Who is actually responsible for the exit, and when? Is the enterprise legal, and can it even be marketed? How or when do you register it? What is the best country to work in, in terms of legal implications and tax liability? Who are the partners and who are the employees? Who actually owns this startup, and who will benefit from the exit?
Any startup requires legal advice to who's against who, and why
A startup is more than just a group of people developing an idea from the ground up. The concept itself must be inspected legally, to prevent negative results. Do you want to establish a startup company in the 'Startup Nation'? You better hire a lawyer so that you create a solid legal framework for the country you are operating in. It is also best for a lawyer to examine the legal implications you and the public face if you startup causes any damage to users, or lead to public outcry or objection, which could prove its downfall.
One recent example is a startup created by a number of celebrities, focused on an app that allowed sending anonymous messages to any person, without disclosing the sender's identity. The public and media campaign against it still reverberates. At the end of the day, a few of the entrepreneurs and the startup's objectors got mired in a series of lawsuits and counterclaims. This is even before we discussed the financial implications and commercial risks of the startup, which may be disastrous. Had the entrepreneurs turned to legal advice first, focused on libel and responsibility for such offenses, the issue would have certainly been brought up in advance, and affect future development. This means that the concept's legality and compliance with judicial norms or precedents would have been discussed. This is essential to any beginning startup. In this case, by the way, we are talking about class actions not confined to Israel only but filed in other countries, too.
Are you familiar enough with your startup's legal environment?
Are there any startups around that are similar to yours, which are perhaps commercial or more successful, since they hold a business advantage over your enterprise, maybe in terms of the risks assumed? Israel is considered a country with very strong regulations, especially in all matters relating to finance. Supervision and regulation over different startups in the financial world are growing stronger, and subject such projects to different stringent regulations, which you must learn about. The risk here is not only that you may lose the capital invested in your startup, but that you may even find yourself entering the area of criminal law, in case you mistakenly violate any law you did not even know about. Planning to launch a startup in the 'Startup Nation'? You better take a lawyer with you, one who is familiar not only with intellectual property law, but is thoroughly proficient in the regulatory and accounting aspects applicable to your enterprise.
Legally registering your startup
So you finally hired the legal advice you require for consultation regarding the legal status of your enterprise. Now you have to get practical – legally register it, protect your unique patent, protect your intellectual rights against passing off and other risks, guarantee that your startup's goodwill is secure, and choose how you register your business. Planning to launch a startup in the 'Startup Nation'? You better take a lawyer with you, to guarantee all your registration is prepared legally. This includes any protective registration which may protect you from legal risks such as illegal use of your brands, names and terms. You also have to ensure that all of your papers are in proper order, that contracts are fair and do not deprive any party, that the distribution of financial income and liabilities is agreed upon, and in case of the liquidation of your partnership – you have to agree in advance on the share of each of the partners in your startup, to avoid any misunderstandings and disputes which may take you to court, not only bringing your startup to a halt, but also driving away potential investors and postponing your exit.
Eli Shimony - Israeli law firm representing clients on all civil/commercial legal issues in Israel. For any questions please contact us and we will be happy to assist.
Email: [email protected], Tel: +972-52-2769773, +972-3-5507155.
The above article is a general information only and it is not intended to replace a legal advice.