The most important legal consideration when you are starting a business is to make sure that everyone knows where they stand with the company. The next step is to make sure that there is clear, written documentation of everyone’s status in the company. To do this correctly, first you have to consider all the relevant questions and contingencies that can affect your business. Here is a non-exclusive list of issues to consider:

  • Will the business seek outside investment? And from whom?
  • Who owns what percentage of the business?
  • Will everyone be working on the business full time or part time?
  • Do we want to build this business to sell it to someone else or as a long-term business for ourselves?
  • What happens if the business needs money – in two weeks, in six months?
  • Who owns the intellectual property associated with the business?
  • What happens if one of the founders wants to leave in six months, or two years?
  • What happens if a founder wants to sell her interest in the business?
  • What happens if the team wants/needs to fire one of the founders?
  • What happens if one of the founders isn’t pulling his or her weight?
  • What happens if a founder gets sick or dies?
  • How do we maximize the tax benefits of building and potentially selling this business?
  • How do we guarantee that our personal assets are protected against creditors and liabilities?

Once you have answers to these questions, the next step is to find a professional to help formalize things. This should be a quick and painless process when done right.