Time to refine a post I did on things to consider in setting up a new business in 2015

So, I created this list of issues to think about, which I update every now and then. Not necessarily apt for all situations, but a good base which a few people have now used to ground their thinking.

If you are interested in starting up a business and, after reading this, have any questions, please feel free to contact me.

The Right Business Vehicle

One or more of sole trader / company / trust (unit or discretionary) / partnership

• Keep it to simple tax effective structures adaptable for the future

• Problems raising money for a trust

• Research and development tax offsets

• Employee share schemes

• Structuring – Risk – tax and asset protection issues

• Company constitutions –start-up tailored – directors & control – advisory boards for risk management reasons – ownership of shares individual/family/trust

• Who owns the IP – the vehicle or is it licensed to the vehicle

• If you have an accountant, see what he or she says as they should know your asset position

Partnership/Shareholders Agreement

Profoundly important to get this right and flexible enough at the outset – need to have provisions for exit of one or more when things and/or personality clashes in the way

• Board representation ratios/voting

• Board representation – ratios / voting rights / special resolutions/unanimous resolutions/ordinary majority decisions

• Vetting of new investors/participants

• Share classes

• valuation method

• Pre-emptive rights and valuation for share transfers and share allocations

• Put and call options / drag along / tag along rights

• Death / disability – buy-sell and insurance issues

• ADR and dealing with disputes

Funding Start-Up in Early Stages

Funding options: –

• Paying for it & giving equity – financial, ethical and legal issues
• Seed funding
• Grants– government – benefactors
• Australian Small Scale Offerings Bought
• Crowd equity funding, types of equity, hybrids

• Disclosure requirements
• +s & -s of convertible notes
• Practicalities of valuation, deletion and control
• Relevance to shareholders agreement/partnership
• What does your bank have to say?

Legal Issues

• What laws apply to the envisaged operation in addition to general business laws
• Opening it up – prospectus problems
• Sophisticated investor exemption
• Crowd funding problems and possibilities
• Relevance of financial services or other licences relevant to the operation;
• Privacy issues and security
• Any problems with existing employment bearing on issues (like IP)
• Anti-money laundering

Protecting the Startup Entity and Related IP

• Consider what IP types are relevant, who owns it, how is provided to the Startup entity, how is controlled and/or shared and commercialised

• How to protect ideas as such, confidentiality obligations

• Boundaries of different types of IP protection trademark, copyright, domain names, patents, confidentiality, registered designs types of protection

• Issues with trademarks (such as classes) what it can and can’t protect and where

• Search to see what is already registered

• Cost of IP protection particularly in overseas contexts – where to protect by registration

• Importance of NDAs

• Who owns the IP? The operating entity or the creators? Licensing and transfer issues including valuation

• How to protect software

• Cyber squatting trademark patent trolls

• Patents versus copyright

• Trade marks versus copyright

• Apps in context of legal protection of IP

• Options for contractual protection and their efficacy

What Contracts Does the Startup Business Need?

• Priority contracts
• Contract contents
• Dealing with privacy issues, particularly in online contexts and business records
• Agreements with customers T&cs inclusions and exclusions and IP protection
• Supplier agreements and procurement
• Which contracts and what things are needed when
• Containing costs
• Problems with exclusivity / restraint of trade

Research and Development Tax Offsets

• Tax issues
• Qualifying to refundable tax offset
• Other options
• What does required innovation mean?
• Employee/contractors and subcontractors

Employees and Contractors

• What’s the difference?
• Cost of staff
• Law sometimes sees contractors as staff
• Exposures to staff
• Contractor versus employee point of distinction and markers
• Status and role of original innovator founders
• Fair Work Act
• Workplace Health and Safety costs
• State Payroll Tax
• PAYG and Superannuation Guarantee liabilities
• Impact on IP ownership of employment arrangements
• Impact on IP ownership of “contractor” relationships and how to deal with it

Leaving the Start Up

• Provisions for departure of founders
• Newcomers and dilution
• Buyouts
• Trade sales and IPOs
• License IP when leaving whether to and whether practical
• Sale /licensing of business v sale of entity
• Continuation of some staff
• Restraint of trade issues on leaving
• Franchising

Employees Share and Option Plans

• Impact of new rules and laps of old rules
• Defining start-up
• Employees not contractors
• Timing and tax
• Effective share option structures
• Impact of an employee leaving

Legal, Tax and Accounting Advice, Stage by Stage

• Priorities
• Price
• Timing
• What and when – staging
• What are the stages and when do you have to start considering them
• Prioritising issues