Starting a business, an entrepreneurial project that makes sense … these are aspirations that are growing in time! According to the Moovjee barometer, nearly 660,000 young people are ready to start their own business by 2020, a real craze … Among the first key steps before starting a business is at the top of the list: legal formalities!
What are the precautions to protect your business idea? What legal form is most suitable for setting up your business? What are the important points to know about the drafting of the statutes and the partner pact? A three-step overview of the basics of legal to master on your fingertips to clear your way in the jungle of law and startup creation.
1st step to start a business : protect your idea
One of the first dilemmas of any entrepreneur wishing to create his business is the protection of his idea … He is often anxious to protect it in order to avoid leaks and copies of possible competitors. However, from the start, you will often be forced to communicate about your project, whether to investors or partners. To avoid the copy-cat or the exploitation of your idea, I advise you to constitute a proof attesting its precedence. For that, it’s very simple, you have two main possibilities:
- Have an NDA (confidentiality agreement) signed with your partners and competitors. An NDA (in English “Non-Disclosure Agreement”) or a confidentiality agreement is a contract between two people who commits one of them not to disclose certain information that the other will have to communicate to him;
- Register your brand with the INPI. Remember a fundamental rule: In French law, the idea in itself does not protect itself. What protects itself is the materialization of the concept and its support. To put it simply: if you have found an original name that identifies your concept, it is this name that can be protected under trademark law. To register a trademark with the INPI (National Institute of Industrial Property), nothing could be simpler: just fill out a questionnaire. This can be done directly at INPI headquarters or online from its website.
2th step to start a business: choose a suitable legal form
SAS, SA, EURL, you are lost among all these acronyms? You do not know how to choose the legal status of your startup? I assure you, this is the question that many young entrepreneurs ask themselves. SAS is – by far – the most suitable and most frequently chosen legal form by start-up creators … for 3 fundamental reasons:
- The SAS provides flexibility and offers associates great organizational freedom. You can for example call a General Assembly by email or by simple Skype, in short, real flexibility!
- SAS is THE STAR structure for your fundraising. Fundraising is a common practice to launch and grow startups. A need to which the SAS also responds by facilitating external investments by the possibility of bringing in new shareholders. In this context, it is common to have to transform an LLC into a SAS to be able to raise funds more easily;
- Finally, to finish convincing you, another advantage of SAS is that the manager’s liability is limited to the amount he has contributed to the company. The profitability of a startup being uncertain, this protection will allow you to fully launch your entrepreneurial activity, without too much financial risk. Useful, therefore.
3th step to start a business: the drafting of the articles of association or of an associate’s pact
To create your business, you will have to draft articles of association and possibly a partnership agreement. What is the difference between articles of association and partner pact? A violation of the statutes results in the invalidity of the legal act, while the non-observance of a partners’ pact leads to the payment of damages without annulling the act.
What are the classic clauses to provide? Here are the main ones:
- The amount of share capital: be aware that no minimum capital is required for the creation of a SAS;
- The number of shares and the distribution among the partners: in principle, the distribution of capital is proportional to the amount of contributions;
- The role and powers of the President of the SAS: the president represents the company vis-à-vis third parties. He has internal powers which can be limited or even suppressed. Consider setting the extent of his role and powers;
- The decisions taken by the community of associates concern the decisions that must be taken collectively. It is important to also foresee by what majority these decisions will have to be taken (unanimity, simple or qualified majority, etc.);
- Approval clause: this clause allows the founders to have a right of oversight over the person to whom an associate sells his shares;
- Preemption clause: allows associates to control the entry of new associates.
Knowing a few fundamentals is the key for anyone who wants to start a business. For the drafting of the articles of association or the partner pact, it is preferable to call on a lawyer or to turn to startups which allow you to obtain your personalized legal documents at a lower cost.
And you, what legal difficulty did you face? Feel free to share your opinion in the comments?