Whether you are in the initial stages of fleshing out an exciting new business idea or have registered your trading entity and are ready to go, here are 5 things to consider in the early stages of launching a start-up.
A search of the Australian Trade Mark Registry is an important first step before deciding on a business name and branding of your business. A trademark is the primary means of protecting your brand from competitors and forms a core component of your company’s intellectual property. Down the line, a third party investor would (and should) be checking to see whether you hold trademarks over your brand as part of any due diligence they carry out into your business so it is important to protect these from the beginning.
A shareholders’ agreement sets out the rules and procedures governing the relationship between all shareholders of a company. Some of the topics covered in a shareholders’ agreement include:
- when and how a shareholder can sell their shares;
- how often do the directors and shareholders need to meet;
- what involvement each shareholder has in the business; and
- how will disputes be resolved.
The agreement should make adequate provisions for the rights and obligations of existing shareholders and future investors. This document is often considered like an umpire on a football field, all the players may be ready to go but without something to keep everyone in line things can get messy…and quickly!
The corporate structure of your business is really important and is something that should be discussed with your accountant and financial advisor before the business begins trading. A business in its first few stages might be operated by a company possibly operating as trustee of a trust. Depending on the type of business, you may also consider utilising a parent/holding company to own the key assets associated with the business (e.g. the intellectual property), while a wholly owned subsidiary could carry on the day to day trading associated with the business (e.g. employing staff and servicing customers). There are advantages and disadvantages to different structures but each and every option should be explored before you embark on your step towards entrepreneurship!
Third Party Agreements
Having your supplier and service agreements in writing setting out the key commercial terms agreed to between the parties sounds simple enough, right? But this is something that is often overlooked by small businesses. Email exchanges and text messages give little to comfort investors and potential purchasers of your business – they want to see that these agreements are in place and are enforceable. It is therefore always recommended that these agreements be accurately documented and properly reviewed before you sign on the dotted line.
Business Succession Planning
When launching a start-up, it is highly likely that your business is heavily reliant on the skills of the founders and the work they do for the business. What would then happen to the business if one of you were to die or become permanently incapacitated? Do you or your business partners have an exit strategy that covers a wide range of scenarios or will you just wing it?
Business Succession Planning may involve a number of strategies, such as insuring the key personnel required to operate the business to ensure that the business has the funds required to hire/source a replacement for that person. There are other options as well – but the first step is discussing succession planning with those integral to the business and speaking to your advisors to make sure that your intentions are fulfilled should anything happen in the future.
Are you launching a start-up?
As operators of a small start-up ourselves, we understand how exciting but also challenging the process is. If you would like more information on what it takes to launch a successful start-up – please give us a call.