The four basic legal documents a new business needs (with some anecdotes on why this is like having a baby)

Whilst this post will explain the four basic legal documents that a business needs, the inspiration for writing it came out of a conversation I recently had with my best friend, who also happens to be an awesome mom to a five month old. (Side-note: around the time she found out she was pregnant, I started my own business.  It’s sometimes same-same, sometimes different. This is one of those same-same moments). Our conversation went something like this:

Me: You really need to sort out your will. I will even send you a draft to just fill in.

Best friend: I know. I’ll do it soon.

Me: No. You really need to do this. Now.

Best friend: Yes, but…

Me: If something unexpected happens, who is going to look after your child? You can’t leave it to the courts to decide.

Best friend: Yes, but, you hope that..,

Me: No! No hoping! There is literally a legal document you can sort out now before anything happens that can help you.*

While I left the conversation feeling frustrated, it made me think that this “child” applies to both the human life form and that of a small business.  There is so much excitement while waiting for the baby to arrive.  Then, when it does arrive, that excitement turns into a complete overwhelming thought of “What on earth did I get myself into?!” This terror is accompanied by a daily goal of just getting enough sleep, in between financial nightmares, dealing with some S**T, and being really proud of this living thing that you are completely responsible for.  And, like a baby, when you least expect it, when you think you’ve done everything you can to make it happy, your business will smile at you, and then vomit…on you.

As a new business owner, like a new parent, it doesn’t have to be an overwhelming process to get your legal affairs in order. Whether you are a one (wo)man band, a few friends with a great idea, or an established business already turning that money over, there are certain legal documents that are non-negotiables.

Incorporation documents

There are many vehicles you can use to drive your business.  Deciding whether you want to operate as a sole-practitioner, partnership, or company, will require some serious thought, as they each have their own tax and liability considerations.  

Irrespective of what vehicle you decide on, it’s important to make sure you’ve done everything you need, which might include: registering the company with the Companies Office and SARS, drawing up a partnership or shareholders agreement, and drafting a memorandum of incorporation.

Intellectual property documents

This has been, in my experience, the most overlooked aspect by all business owners (small or otherwise).  But, when it comes to raising funding (I’m looking at you especially Tech Start-Ups), or enforcing your rights, the first thing to come up will be your intellectual property.

Like tax, intellectual property (or IP) is something every single business needs to consider. Repeat after me: “Every! Single! Business!”. And again louder for those in the back: “Every! Single! Business!”. 

You don’t have to do all of it at once (trade marks, for example, can be registered later, but more on that in a separate post). But, from the outset, you need to have an IP assignment agreement in place at the very least. Did you know that if you outsource the development of your logo, website design, software code, or marketing materials you might not own the copyright in it? Spoiler alert - there is a 99% chance that without a written IP assignment agreement in place, you do not own the IP in these things. Yup, even if you paid good money for it.

Non-Disclosure Agreements

There are mixed reviews about whether a non-disclosure agreement is really necessary, or practical as a start-up. Some businesses have found that when they have given one to those mammoth corporations to sign before a funding pitch, they have simply been laughed at.  

Whatever your experience is, it is still worthwhile to have a basic NDA in place that potential funders, service providers, and partners can sign. This should set up what you consider to be confidential information, who owns the IP being discussed, how the confidential information should be handled, and how long the confidentiality applies.

Data Policies 

If you are reading this, it means you have a social media account, and an internet browser. Therefore, you would have seen the issues of data protection, personal information, and cyber security making the headlines every day. Companies like Facebook and Google have received most of the limelight when it comes to the abuse of personal information, but with new privacy legislation coming into force around the world, all businesses will need to step up their data policies.

If you operate a website, you should have a cookies policy and website policy, in addition to your privacy policy. If the first thought you had when you read “cookies” was an Oreo, you have some bedtime reading to do.

Going back to the discussion I had with my friend about the will, like these business documents, it’s important to start somewhere rather than being caught up in that sweet new baby smell so much that you don’t do anything at all. You don’t have to feel overwhelmed, just start somewhere and ask for help if you need to.  Also, while you’re here, what are your thoughts on starting a business shower revolution? Because I could really benefit from putting a laminator on my registry.

*Clare has been my best friend since we were 5.  She has, in many ways, been the co-parent of my business over the last year.  She is the first person I go to with any idea I have, big or small, and I am 100% sure that I wouldn’t be able to raise this business without her constant support.  As I token of my gratitude, I try to change as many S**T nappies for her as I can.

#smallbusiness #smes #legalcompliance #businessdocuments #intellectualproperty #datasecurity