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Business Partnerships; A Necessary Evil – Tosin Omotosho

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Mr A and Miss Z are high school friends and they have a vision to build a social network unique to Africans. They have shared this dream in high school and nurtured it for years. Shortly before graduation from the University, they proceed to register a company Afrinet Limited and  start business right away.

Business is booming as the social network becomes the toast of a large number of African youths.

However, trouble looms as Mr A and Miss Z start having disputes. They cannot seem to agree on crucial decisions and their duties towards the business are over-lapping.

A promising business is being threatened because of personal differences of the co-founders.

 

Does this story sound familiar?

In some climes, people frown at getting into business partnership for several reasons especially lack of trust.

However two good heads are better than one. In spite of failure of business partnerships round the world, there are still those that have survived over the years.

 

What’s the difference?

One choose your business partners carefully, you want to be sure you can both take decisions together as a team. Running a business involves taking lots of decisions.

Two communicate your business model, vision, goals, strategy etc and make sure you are both on the same page. If you believe in a low-cost product for example, and your co-founder believes in a highly priced product, you both have to agree on what product to produce and when.

Three, document what you both agree. Most co-founders are so busy with building a business that they miss this important step. After agreeing on the important aspects, you both need to write it out in detail. Take a step further and make it a legally binding contract. Get your lawyer to prepare a co-founders agreement/partnership agreement/operating agreement.

Signing an agreement doesn’t mean you don’t trust each other, it rather shows that you both want to be accountable to the business and have what you agreed upon stated clearly in black and white.

Partnership isn’t evil, but first things first. In my own opinion, when starting a business, 2 to 4 partners/co-founders are enough. You can admit more partners as you scale up.

What is your ideal number of co-founders for a business? Would you enter a business partnership? Let’s discuss in the comment section.

 

The Author:

Tosin Omotosho is a real estate and business lawyer.  She helps business owners give legal structure to their business and avoid liabilities caused by legal mistakes. An avid reader and writer, She is the Principal Partner, Charis Legal Practice. Contact her here, to read more of her articles, click here.

Legal Business

SMEs: Legal Tips For Office Space Acquisition | Morenike Okebu

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In Africa today there are a lot of issues facing small to medium enterprises (SMEs). One of the main issues is getting a suitable place to locate their business. If you own a start-up or SME you may choose to operate from home to reduce costs but there are other options available such as renting a space for your company, sharing a space with another business or purchasing a space for the purposes of your business.

Renting a Space

If you want to rent a space to operate your business, there are a few things you have to bear in mind:

  1. The space should be slated to be for commercial use. You should look out to ensure that the space you want to rent can actually legally be used for commercial purposes in order to prevent having issues with the Ministry of Urban and Regional Planning.

 

  1. You should also ensure that you are renting the space directly from the owner of the property. You can engage the services of a lawyer to carry out a search at the land registry to help you confirm this. I always advise that payment of rent is made into the account of the landlord directly and any agency and legal fees are paid to the agent and lawyer separately.

 

  1. Finally you need to review your lease agreement carefully. Get a lawyer to check the clauses in the agreement and ensure you are covered. If you need to hang a banner or put up signage for your business, your agreement must permit you to do so. If your business involves clients coming over and parking their cars, there should be adequate arrangements made for parking space and so on.

Time would not allow me discuss all the legal considerations you need to bear in mind within this short article but these three tips  if taken into consideration would help prevent you from making mistakes.

 

Shared office space

I love the idea of a shared space and I believe it is a great idea for businesses who want to reduce their costs yet have an office. In a shared office space, you may share more than an office, both companies may use one receptionist and split the salary and so on.  However, there are a few things you need to take into consideration before getting a shared office space:

  1. Make sure the person you are subletting the property from has the authority to sublet the property under the head lease. One of the first documents you would need to see before agreeing to share a rented space with someone is their title to the property, it could be a tenancy agreement or a lease agreement for example. You need to look out for the conditions of sub – lease. A good lawyer should be able to advise you on the clauses contained there.

 

  1. Review the office sharing agreement: one of the reasons people have issues in shared office spaces is that the terms of combined use are not clearly spelt out. You need to have it clearly stated:
    1. Who pays for what and when?
    2. Who pays for and organises waste disposal, electricity bills, water bills, local government taxes?
    3. How are costs shared where emergency measures must be taken for light or water?
    4. Who covers repair bills and chooses the workman?

These are just a few of the issues you need to bear in mind to prepare the space sharing agreement. If you have been given one already, were these issues taken into account? You should get good lawyer to help you ensure that all your T’s are crossed and your i’s are dotted.

Also Read Immployment Connect By Zandile Dube

Buying property

If you are buying a property to use to do business for your SME or StartUp, congratulations, you are in the top 1% of many start-ups and would save a lot on rent. However, before you buy land in Nigeria, there are a couple of tips that would help you if you bore them in mind:

  1. Get a property that has been designated for commercial use so you wouldn’t have any issues with the Ministry of Urban and Regional Planning.
  2. If the building has been constructed, ensure that it complies with the building planning approval that was given by the government.
  3. Carry out a search at the appropriate registry. I can give you a hint, searching the land registry is not enough.
  4. Ensure a lawyer reviews your agreement before you pay or sign on the dotted line.

In this article I have just given you a few tips that should help you as an SME make good decisions on renting, sharing or buying office space. I am always an advocate for doing things right if they must be done at all. I advise you always engage the services of a good lawyer before engaging in these transactions in order to save yourself from fraud and unnecessary hardship.

Image:Park Commercial Real Estate Inc.

Author

Morenike Okebu is a qualified Legal Practitioner that graduated from the University of Sheffield at the top of her class. She has several years of experience practicing in leading law firm owned by a Senior Advocate of Nigeria and now owns her own business which focuses on solving the legal problems facing SMES and Start-ups.

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Legal Business

Co-founders Should Avoid This Legal Mistake

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Are you a co-founder of a company?

Did you found a company with another person(s)? Meaning you and another person or group of persons has pulled your resources together to start a company, with a fantastic business idea that is guaranteed to change the world.

Let me call your attention to a mistake that many co-founders of companies make all over the world.

A quick question, have you ever heard of Eduardo Saverin? He was a co-founder of Facebook Inc. with Mark Zuckerberg but not any longer. They had no co-founders agreement and on the basis of that, he was eventually booted out of Facebook after years of litigation and slugging it out in court.

Imagine losing out of such a profitable company? It is horrible right? To confirm this story, you can read up more details on the internet.

A number of co-founders lose out of their companies because they fail to protect their interest in the company. It is important that co-founders agree on certain important issues and have it documented in a binding agreement.

But you say, our company has a memorandum and articles of association. Yes, but as you will soon discover, it isn’t sufficient.

What is a co-founders agreement and what does it contain? Why is it so important?

A co-founders agreement contain among other things; Roles and responsibilities of each founder, equity ownership and vesting, remuneration, confidentiality, the goals, vision of the company, appointment of employees, signatory rights, mergers and acquisition, exit strategy, issuing new share , percentage of ownership, type of shares, how board members will be appointed, merger, signatory rights, quorums and resolutions, conflict of interest among many other things.

A co-founders agreement is a detailed agreement that sets out clearly these important issues as agreed upon by the co-founders hence  protecting the interest of the co-founders so they can concentrate on the hectic tasks of running and building a business.

Once it is made into a legal agreement, all the parties are bound by it. This is great, right?

Does your company’s memorandum and articles of association include all these details?

Have you discussed with your co-founders the issues raised above and documented it in a legally binding contract?

If your answer is yes, kudos! You are on the right path.

If your answer is No, then you know that your interests aren’t protected.

Will you work hard at building a company, scaling up but leaving your investment to chance, like Eduardo Saverin?

The choice is yours; i trust that as an astute entrepreneur, you will choose wisely.

 

Author

Tosin Omotosho is the Principal Partner at Charis Legal Practice, a law firm based in Lagos Nigeria.  She is a business lawyer and helps companies implement best legal practices and avoid legal mistakes associated with running a business in Africa.

She has over 11 years experience in legal consultancy, litigation, company structuring, commercial contracts and commercial transactions. She has consulted for and represented companies in the real estate, retail, advertising, agriculture, e-commerce, technology, hospitality and manufacturing industries.

An avid reader and writer, she believes in helping companies improve their operations and increase revenue by placing more importance to the legal aspects of their businesses.  Contact her here,   to read more of her articles, click here.

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Legal Business

Legal Issues Entrepreneurs Should Consider Before Starting A Business | Morenike Okebu

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Morenike Okebu is the Founder/CEO at Reni Lega

There are so many legal issues that a business owner has to consider before setting up a business. In this article, I have identified some basic but essential legal things to consider before you start a business irrespective of the country you reside.

 

1. What’s my idea exactly?

It is very important for you to have a clear vision of what you want to do and how you want to do it. This is your business idea after all. The idea should be beyond a casual thought on a Monday morning, write it down, and write down all the things you need to make it work. Determine whether the idea if feasible, even if you cannot start on a large scale you may be able to start on a smaller scale.

 

2. How can I protect my idea, is it unique to me or did I copy it from someone else? 

After you know exactly what your idea is and how it works, you need to determine whether your idea needs intellectual property protection. I cannot understand why someone would put so much work into creativity then forget to protect their work. You must remember that creativity is quite expensive and costly; to create a new drug in the pharmaceutical industry for instance could cost millions of dollars. Imitation on the other hand is quite cheap. So really think about whether your idea is something you can protect and if so consult your lawyer.

 

3. Are there any legal regulations for governing my idea? Is this idea allowed in my country? 

Once you have thought about protecting your idea, the next thing you need to think about is whether there are any government regulations you need to comply with in your country to execute your idea. If you look carefully you may find that parts of your idea may be illegal in your country or you need a license to carry out the activity. If the idea is related to food you may need approval from the food regulation authorities for example.

 

4. What legal entity would execute the idea for me? 

After you have confirmed that your idea can legally be done in your country and that you can meet the requirement to get any license required you now need to think of the legal entities you want to operate through. You have options:

  • Sole Proprietorship.
  • Partnership -this could be limited or otherwise.
  • Business name.
  • Company.

Which is the best for you? You can consult your lawyer to determine which best suits you.

 

5. What legal documents do I need to make my idea a reality? 

The last question I have time to deal with today is what are the legal documents you need to make your idea a reality. You may need a non – disclosure agreements to pitch to investors, partnership agreements with your partners, shareholders agreements for your investors as well. You should try to list them out and consider getting a retainer with a lawyer to help you with all of them in order to prepare you for business.

I hope this has helped you realise some of the legal issues you need to consider before starting your business.

Author:
Morenike Okebu is an attorney with several years of experience. She graduated top of her class and is the founder of www.renilegal.com a law business focused on smes and start ups. She worked for several years at a top law firm in Nigeria owned by a Senior Advocate of Nigeria. She is now a partner in the law firm GM George Taylor & Co. You can contact her by sending an email to [email protected]

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