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What every young entrepreneur should know about law and starting a business
The Mosaic Enterprise Challenge comes to its grand final on Thursday 23 April 2015 in London. The challenge, organised by UK charity Mosaic for young entrepreneurs in schools across the country, will feature the five regional winning teams. Having already seen off credible competition from 4000 young people taking part in this year's programme, they will battle it out with their amazing pitches to become this year's national winners.
The teams will pitch in front of an expert judging panel including Chairman of Judges Claude Littner, adviser to Sir Alan Sugar on The Apprentice. A feat, even the most experienced entrepreneurs would find frightening. Among the prizes for the winning team will be an investment in their proposed venture.
Starting a business
Starting a business is a very exciting time. You have great ideas and dreams about where the business will be in years to come. But there is one part of the start-up process that ambitious entrepreneurs often get wrong. That's the legal part.
Unfortunately law can be boring but it's also incredibly important. Understanding this early on can save you hassle and heartache in the future.
A common problem, is relationships. If you're starting a business with a partner and it goes well you'll probably fall out. If it doesn't go well, you'll almost certainly fall out, either way you'll probably fall out with one another.
To stop this from happening you need a good partnership agreement so that everyone knows what the deal is; so there is no misunderstanding. It's important for any partnership to have a Partnership Deed in place. If you start a Limited Company, then a Shareholders Agreement should be in place. Each of those documents can regulate what happens in the event of disagreements occurring, how profits are to be shared, how decisions are to be made and how the business is to be funded.
If you come to sell the business, raise money or you merge your business, you will then appreciate how important that bit of paper was.
The only time you normally reach for a legal document is if something goes wrong or if you selling the business. So make sure you get it right at the beginning.
When you do business with anyone you will need a contract. These legal bits of papers needn't be daunting. They are just the deal between the parties, written down. They include what happens if something goes wrong so that there is no misunderstanding. Although simple, you do need to get a lawyer to draft a contract to avoid problems in the future.
Working with a lawyer
A lawyer will also give advice and assistance on a range of things. They can help with drafting the appropriate and necessary terms and conditions of trading; advising in relation to employment contracts for all staff involved including the founders of the business to protect their rights and those of the business.
Many law firms will give free advice to business start-ups to give guidance as to how they should be set up. There is also lots of free advice on Government websites and other legal libraries.
UK Legal Hour