For new business owners, seeking legal advice at the outset on everything from shareholders’ agreements to intellectual property rights can be a crucial step in order to avoid headaches and disputes later on, says Toronto corporate lawyer Sammy Redlick.
Legal advice and the agreements put in place can differ depending on the scenario a new business aims to follow — whether more of a traditional model, funded using the owner’s money until profitable, or a startup path, where entrepreneurs will seek to raise capital, says Redlick, partner with Torkin Manes LLP.
For most, the first step, he tells AdvocateDaily.com, is to establish the company itself, taking into account the founders’ vision for the business, how they plan to fund it, who the shareholders are and what their contributions will be.
“Establishing the corporation and helping them work through how to set up the initial capitalization of the company is an important step. And in doing that, we always strongly recommend a shareholders’ agreement, and we work very closely with our clients to work through the shareholders’ agreement and all of the considerations there,” Redlick says.
“Whether it is a more a traditional model where we think there’s an operating business that’s not going to have new shareholders all the time, versus a startup that’s going to have several rounds of investments and eventually venture capital investors, that will make a huge difference in the approach that we take at the outset with the shareholders’ agreement,” adds Redlick.
For example, he says, often startups are ‘bootstrapping’ their business and making difficult decisions on where to allocate funds.
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