Launching a start-up: 4 legal tips for entrepreneurs
Launching a start-up is an adventure full of challenges, opportunities and crucial decisions that can define the success or failure of a company from the very beginning. In Spain, the legal and fiscal framework for companies that meet the characteristics of a start-up has a series of particularities that every entrepreneur should be aware of in order to protect their project and ensure its sustainable and orderly growth, thus creating a more attractive structure for its valuation by third party investors, among other things.
The following is a small guide with a series of tips that every entrepreneur should take into consideration when starting a start-up project.
1. Define the most appropriate legal structure for your start-up
Choosing the right legal structure from among the different options is crucial to ensure such issues as:
i) The impact on the legal liability of its partners, with this condition acquiring special relevance in companies with specific regulations, such as companies dedicated to the FinTech, eHealth or EdTech sectors, among others, which sometimes require the choice of a specific type of company due to the characteristics of the activity itself;
(ii) Appropriate tax structuring, depending on the partners’ intentions, their particular conditions and the characteristics of the business activity;
iii) The adaptation of the type of company to the investment and growth requirements of the company itself, bearing in mind that legal forms such as the limited liability company (S.L.) or public limited company (S.A.) can facilitate the entry of new investors through the issue of participations or shares, or even the obtaining of subsidies, considering that, on occasions, their own legal bases require the beneficiary to have certain specific legal forms in order to have access to this financing.
2. Formalising a partnership agreement when starting up a start-up
Having a shareholders’ agreement in place from the very beginning of a start-up is essential to prevent conflicts and ensure stability within the framework of the business activity.
Through this document, the entrepreneur can define the roles within the start-up, the way contributions are made, the distribution of profits, the various mechanisms for the entry and exit of partners, and also protect intellectual property, among other things. In addition, having a shareholders’ agreement will help to regulate dispute resolution mechanisms to avoid blockages in decision-making.
In short, this document is key to attracting investors, as it will provide legal certainty and greater confidence from these third parties. Tailoring the covenant to the specific needs of the company will ensure that the company is better prepared for unforeseen situations, promoting its further growth and long-term sustainability.
3. Protecting intellectual property when starting a start-up in Spain
From a legal perspective, protecting intellectual property at the beginning of a start-up is essential to ensure exclusivity over key assets such as trademarks, patents, designs or proprietary software.
In this sense, registering or entering into confidentiality agreements on these rights allows the holder to prevent misuse by third parties, provides greater guarantees of prosperity in the face of possible claims of infringement and strengthens the start-up’s competitive position.
Furthermore, protecting intellectual property through officially recognised registers (such as the OEPM, the EUIPO or the Madrid System) can ensure or enhance the return on investment in innovation, improve the negotiation of trade agreements and incubate greater confidence among investors, as well as being a device to avoid loss of competitive advantage and misappropriation disputes.
4. Comply with data protection regulations (RGPD and LOPDGDD).
The Organic Law on Data Protection and Guarantee of Digital Rights (LOPDGDD) and the General Data Protection Regulation (RGPD), among others, regulate the mechanisms for collecting, storing and using personal data of third parties outside the start-up, and it is essential in this regard to pay attention to aspects such as, among others, the following:
- Informing users about the use and processing of their data.
- The request and collection of explicit consent from users to collect their data.
- The adoption of security measures to protect the personal information handled by the start-up itself.
From a legal point of view, complying with data protection regulations ensures transparency in the use of personal information of customers, employees and users, preventing potentially high financial penalties, as well as helping to protect the company’s reputation, fostering user trust and facilitating the creation and maintenance of solid and lasting business relationships.
In conclusion, the process of launching a start-up is endowed with great legal and fiscal complexity that requires a meticulous and professional approach. Every decision taken in the early stages of the project has the potential to influence its future growth and stability. Therefore, it is highly advisable to have specialised legal advice to undertake a start-up with the best guarantees and greater legal security, thus minimising the risks that may arise and optimising the opportunities to avoid future market challenges with a solid and well-structured base.
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