Legal Issues For Startup
If you've got legal issues or you think you may you're probably going to raise some venture capital to eventually grow your business. I am sharing with you some steps, It is not legal advice. But I would suggest you that you should hire some experienced startup lawyer to avoid any startup legal issue. If you need some legal advice about your startup, I would highly recommend you reach out to an attorney.
Wrong Incorporation.
For example, they don't have LLC's in Canada. In Canada they have the only option is a corporation so if you're building a company that's going to give equity to other investors or teammates, etc, then just set it up as a corporation in Canada while in the USA there is a different situation.
In USA LLC should be the option. It all depends on your country's regulations, so have a deep look at what you should get to avoid any startup legal issues in the future.
Intellectual Property Ownership.
Intellectual property. This is the challenge that can arise by contractors, if you are outsourcing your project to the contractor to create the new technology for you and eventually you want to sell that company. Because if they worked on it and you didn't have the right IP ownership agreement, then they could claim for that technology. So the easiest solution to solve this is in the contract and also in the employment contract the IP ownership clause which ensures that when they are working for you they cannot claim IP ownership. By doing do so can make your technology safe.
Not complying With Securities Law.
Not complying with securities law. If you have not heard of a thing called credit, go and search about it. There are a bunch of other securities laws too. The biggest thing I see is that many founders are raising money from non-accredited investors. The reality is that you can't sell somebody equity if they're not an accredited investor. Now this definition of what's an accredited investor changes all the time. There have been some new changes in crowdfunding firms. You should be updated when you want to start a startup and make sure you comply with all security laws.
Not Doing Due Diligence.
If you're raising money from an investor it is your responsibility as a founder to find out who this person is. How have they acted in the past? What is their vision for your startup and where do you want to go and your investor is compliant? Because if it's not, you're going to find yourself in a really bad situation as you raise your next rounds of funding. That situation could be anything like your old investor may not willing to sign off a new contract and because of that, they might actually block that next round of funding. So you need to make sure that if you're raising money from a new investor do your due diligence to avoid future legal issues, talk to previous investments that they've made to the founders and CEOs. See how they acted when things did not go right in their previous investments. Do not consider the investor who wants to invest in hockey stick growth startups. They are actually problematic people.
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