ON #WAHALADEY?® FOR STARTUPS 001 [FAQ]
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Q: Is it really necessary to hire a lawyer for the incorporation of our start-up? Why is it so expensive?
A: “It seems to me that this would be a pretty standard process. What is “expensive?” Creating a business entity is as simple as completing and filing (and paying for) the appropriate paperwork. The actual legal “heavy lifting,” rather, is drafting appropriate operating agreements, shareholder agreements, bylaws, and other charter-type documents which are never cut-and-paste, as usually believed by clients. Every agreement to be drafted at every point in times has its own peculiarities”
Different Legal Practitioners in Nigeria with different levels of experience in different parts of the country charge different rates. What you must always consider is the experience of the legal practitioner in the field of your start up and how well such Legal Practitioner can aid you in minimizing cost within the confines of the law.
Q: What kind of information do start-ups have to disclose when they are still private? With forms like the incorporation certificate, share table, etc., which of these needs to be public and when?
A: Forming an entity (e.g. LTD) will generally require you to disclose, to the jurisdiction in which the entity is being formed, the principal physical location of the business, and name and location of respective branches.
Some jurisdictions require you to disclose corporate capitalization (but I cannot think of one which makes that information publicly available). If your start-up needs certain business licenses, you may need to disclose personnel information to “responsible” agents, Legal practitioner and representatives of respective government parastatal.
You may, upon selling securities, need to file forms with the SEC or agencies in which you disclose certain financial details (EFCC i.e. SCUML) in trying to attract foreign entities by lauding the privacy they afford to business organizers. However, “privacy” interests should be taking a back seat to logistical, tax, and other considerations to make when going into business.
Q: Hello! I realize that this is sort of a general question, but I know that many first time start-up founders make a lot of legal mistakes which can be very costly later on or even ruin the company. What are some pointers that you give entrepreneurs to avoid the most common pitfalls?
In no particular order, common mistakes include:
– engaging, and paying, product and software developers based on an RFP or otherwise without a contract containing appropriate IP assignment, representation / warranties, and licensing provisions, among others;
– not having a trademark clearance search performed before either applying for a registration or investing in marketing with an unqualified mark;
– merely filing for incorporation of Organization to create a LTD and not having an operating Agreement drafted by and among the Members;
– forming a “Business Name” entity because the filing fee is relatively cheap, or because forming a “Business Name” entity is commercially cool;
– using contracts obtained online and without review, whether from LegalZoom, GOOGLE or otherwise;
– treating independent contractors like they were employees; and
– Messing up by making parties signing a self-reviewed contract which eventually turn around to attack you.
Don’t do these things, and remember Legal Practitioners after. Start with your Legal Adviser from the GO!
Remember this Article is in no way Legal advice and must not be substituted for one. Please contact your Lawyer if any WahalaDey?®
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