Legal Considerations for Startups

Meet some of the Goodlawyer team. From left to right: Matt Scrivens, Director of Community; Katie Knopp, Social Community Manager; Tom Alvarez, Co-Founder & CPO; Parker Smith, Co-Founder & CTO, Grant Lahring, Head of Growth; Zak Biggs, Director of Public Affairs; Brett Colvin, Co-Founder & CEO

We’ve learned through the past experiences of our lawyers and clients that proactively engaging with the law has a net positive effect to one’s business. The general feeling is that paying legal fees is the last expense any business owner wants, but in fact, acquiring the help of excellent lawyers at the outset of your business will save you money in the long run. It’s just good business! Sweeping legal issues under the rug can result in a “snowball effect”, creating a bigger problem down the road than if it were to have been properly addressed at the beginning.

Our main prerogative at Goodlawyer is to demystify the complex world of legal rules and jargon by getting entrepreneurs comfortable with how the law works at an early stage. The law is a scary and daunting place – even to those who have navigated the industry for many years. In fact, a number of clients we’ve met have simply avoided anything to do with the law, thinking if they just ignored the issues that popped up, the problems would magically go away. Unfortunately, that isn’t the case, and that perception is something that Goodlawyer wants to change.

Instead of brushing off dusty legal textbooks or Googling arcane case law, we take a different approach to legal education. We look at it from the perspective of a “Day 1 Entrepreneur” instead.

You might fit this description of a Day 1 Entrepreneur: Maybe you have a great new idea and you’re ready to put it to the test. Maybe you realize there’s a bunch of logistical questions that you don’t have the answers to. Maybe some of the problems you’re facing are eating up valuable time or stopping you from working on your business altogether.

Becoming fluent in the law – and how it affects your business – is critical to navigating these issues when they arise. Day 1 Entrepreneurs should focus on four main legal topics that should be at the forefront of any new venture: business law, intellectual property, employment law, and contract law.

Topic 1: Business Law

Business law plays an important role no matter what stage your business is in. It comes in before your venture is even off the ground to determine how your business looks, throughout various peaks and valleys, all the way to exploring founder exit strategies. It can dictate what responsibilities you have to consider, how to protect yourself from risk and liability, how you’ll expand your business, and the list goes on. From our experience, the best practice is to be aware of these implications right from the very start.

As a startup company, one of your biggest considerations will be whether to incorporate or remain a sole proprietor. A corporation is a legal entity that’s separate and distinct from you. It is important to consider incorporating if you want to grow your business, hire employees, attract funding, or limit your personal liability. A lawyer can help you incorporate by outlining the right business and shareholder structure, registering your business, and reserving your company name. You can learn more about the potential advantages and disadvantages of incorporation here.

Topic 2: Intellectual Property

It’s a pretty broad topic to broach, but the key to making intellectual property law work for your business is knowing what part of the law applies where and when. IP applies to more than just tech companies; it has a big impact on a variety of crucial aspects like your company brand, creative works, potential secret sauce recipes, and more. IP can be broken down into 3 broad categories:

1. Copyright registration is required to protect a company’s literary, artistic, dramatic, or musical work.
2. Trademark registration is required to protect the unique combination of letters, words, sounds, or designs that distinguish a company’s products or logo.
3. Patent registration is required to protect a company’s process or product invention.

Topic 3: Employment Law

For the entrepreneur, employment law marks an exciting milestone in their business. The demands of your business are so high, you need to start bringing in some extra help. The type of work classification established between a payer (one who pays for the service) and a worker (one who offers services for payment either as a worker or independent contractor) substantially impacts both parties in various ways. Tax obligations, the worker’s eligibility for employment insurance, other legislative protections, and the payer’s liability for the employee’s conduct are just a few of the considerations.
In most provinces, there is an Employment Standards Code that governs many aspects of employment relationships. As an employer, you need to know what your responsibilities are, effectively outline the employee duties, and what will happen if it doesn’t work out. You can learn more about common provisions contained in an employment agreement here.

Topic 4: Contracts

Contracts are the way in which the first three legal topics materialize, and they come in all forms, shapes, and sizes. They’re generally understood as “enforceable promises”, so they add a level of certainty and trust between parties that don’t know each other very well. Certainty and trust are two cornerstones to any successful business relationship. Contracts can be used to:

  • Prevent a party from doing something: “Don’t steal my business idea and set up a rival company!”
  • Guarantee that a party does something: “Ship me 100 gallons of ice cream for this price and on this date!”, and
  • To otherwise plan out relationships between the signors of said contract: “I am now your personal masseuse, sign here and here so you can’t sue me if I injure you!”

While you may have not become fluent in legal jargon after reading this one article, we hope that it provides a solid foundation for you to build upon as your business grows. Goodlawyer produces a wide variety of content pertaining to these four main legal topics at our Legal Resource Hub. Here you can find free educational resources including blog posts, webinars, YouTube videos, and podcast episodes.

About the Author

Brett is an entrepreneur, lawyer, and CEO of Goodlawyer. Brett has overseen Goodlawyer’s growth from inception to a 20+ person team, leading them to Startup Calgary’s Alumni’s Choice Award in 2020. He practiced as a corporate lawyer at one of Canada’s largest law firms for 3+ years, where he experienced firsthand that most business owners can’t afford the legal help they need. Goodlawyer was co-founded by Brett in 2019 on a mission to democratize legal services for startups and entrepreneurs and make law more accessible.