5 Legal Terms Startup Founders Must Be Familiar With
As a startup founder/owner, you are on a constant journey of knowledge and learning. This means that you must continually give yourself to learning, and such learning will be across many fields or subjects that directly or even indirectly relate to starting or running your business. One important aspect is Legal.
Whilst we astutely advise that proper legal counsel be sought from a lawyer, it is also in your best interest as a startup founder that you are conversant with certain legal terms to ease your work. We’ll share 5 simple ones with you.
This is the legal process used to form a corporate entity or company. It is one of the two ways you can register your business here in Nigeria. The other is registering a business name. It is however more advantageous as it separates the company’s assets, liabilities and income from its owners and investors. It also incites credibility and trust from potential investors and puts your business in a good position when seeking a grant or a loan.
Closely related to incorporation are shareholders. Shareholders are any persons (or companies) that own at least one share of your company’s equity. In more basic terms, they are the owners of the company. As shareholders, they enjoy the benefits of the company’s successes in the form of increased stock valuation or profits distributed as dividends. They could also lose money if the company performs poorly. As a startup founder, you should work at having a shareholders agreement for your shareholders as it helps to govern the relationship among the shareholders, and between the shareholders and the company itself.
Whilst this looks very common and familiar, this ‘word’ has gotten many startup founders into trouble because they didn’t know what is to be known about contracts. A contract is a legally binding agreement between 2 or more parties which the law/court will honor. An important thing to note is that a contract must be consensual and must contain an offer (terms to be fulfilled), to the acceptance of that offer and finally to its execution/ termination. Ensure that no term is bogus in the contract. You can read here from our resources on other red flags to look out for.
4. Intellectual Property
As a startup, one of your biggest assets is your Intellectual Property. Intellectual Property, or IP as it is fondly called, is the ownership of concepts, processes and ideas, as opposed to physical property which characterizes a tangible asset. Intellectual property ranges from logos and corporate identity, to innovative and disruptive products, services and processes that differentiate your business offerings. Protecting your IP – by trademark, patent or copyright – enables you to protect your brand and prevent others from using it for themselves. It grants you almost exclusive rights to market for that design or product.
Now this may sound all simple but as a startup founder, you will want to keep this word in mind as you start or run your business. Compliance is showing that you have taken all the steps and actions deemed reasonable to ensure that your business/company follows the rules/regulations applicable to it. You must ensure that regulations guiding your business both generally and specifically are kept to as infringing regulations may result in sanctions from regulatory bodies, fines or penalties, and possibly legal action.
With all said, do not trivialize getting sound legal counsel for your business. You can get a seasoned lawyer here for proper consultation.