5 REASONS WHY YOUR START-UP COMPANY NEEDS A LAWYER
You may have a brilliant idea and the capital to start a business. Some people start their business themselves with some help from their family and friends, while some others do it by having partners and roping in investors who generally do not have any say in the day-to-day functioning. They only get a share of the profits proportionate to their investment.
Many start-ups have gone on to succeed and become big companies over the years. However, there have been many who failed in their venture. In fact, the number of start-ups who have failed is far more than those who have succeeded. There are different reasons for the number of failures, such as ignoring the legal issues. Entrepreneurs may be very good at running their business, but usually lack the legal knowledge required to run a business. One aspect that is very important is the type of business structure. The most common structure in India is the limited liability partnership or LLC. Setting up LLC in India is a simple process, but you need a lawyer to assist you in the process so that nothing is left to chance. Associating with a business lawyer from a very early stage is crucial to the success of the company. We discuss here some reasons why your start-up needs a lawyer.
The Chances of Success Can Increase
An experienced lawyer is highly talented in recognizing trends and patterns. A good lawyer uses his/her experience of advising other start-ups to ensure that you don’t commit the same mistake that caused other companies to fail. Besides, hiring a lawyer in the early stages of the venture can help you avoid the most common cause of failure of start-ups, that is, conflict between the co-founders. Co-founders conflict has been at the root of most start-ups failure. It is, therefore very important that you have a co-founder agreement to protect your interests as well as that of the company. It is advisable that you get this agreement drafted as early as possible, preferably before the company is registered, to avoid any dispute later on when the company valuation rises.
Lawyers Help in Increasing the Valuation of Your Start-up
Besides helping you minimize the risk of disputes, a good lawyer plays critical role in maximizing the value of your company. For instance, a lawyer can help you decide which business structure to choose based on the maximum tax benefits and other concessions that you are likely to receive for a particular type of company. If you have to choose between setting up LLC in India and a private limited company, your lawyer would be in a position to provide you proper guidance as to which form of company is more beneficial in terms of various tax exemption that you get. Start-up lawyers can also arrange for funds as they have access to venture capitals and other angel investors, thus adding value to your firm.
Fixing Mistakes Later Costs More
Start-ups generally think that they don’t need lawyers in the early stages of their existence. They have the notion that the money they would pay a lawyer could be used for more productive purpose in their business. They have this feeling that legal issues can be addressed as and when they arise. What they fail to understand is that it costs more money and time to defend later when they are sued for something. As they say, prevention is better than cure. It is better to avoid mistakes in the first place than to hire a lawyer when a legal offence is committed. It is, therefore, advisable for start-ups to hire a lawyer to help them in their daily activities to ensure that every law is complied with.
Fixing Every Mistake is Not Possible
There are some legal mistakes that are not easy to fix. Some mistakes may have heavy costs attached to them. For instance, if you inadvertently violate labour and employment law, such as treating a regular employee as contractual worker, the penalties could be very severe. Both state and central governments have the right to impose fines and penalties for such violations. A lawyer can help you avoid such a situation.
You Don’t Know the Legal Requirements of Running a Business
A start-up founder has to perform many tasks, and you may not be qualified to do a lot of those tasks. Legal issues are usually very complex and not everybody can correctly interpret the laws. So unless you are able to interpret the laws, you cannot solve your legal problems. Lawyers understand the nuances of the law much better and, therefore, can help you navigate through them to avoid any unintended violation. Legal requirements of running a business are best understood by a lawyer, so it is better to leave that job to them.
The reasons cited above should be enough to help you understand why a start-up company needs a lawyer. A lawyer should be a core member of your team who can help you in setting up LLC in India, the most common form of business structure, and at the same time help you in your day-to-day operations.
