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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

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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Legal Business

This Is Why Terms And Conditions Is Very Crucial For Business Transactions

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Tola runs a beauty consultancy outfit where she helps ladies look their best by choosing the rights outfits, in the right colours, shapes and sizes, to suit them. She also runs an academy where she teaches young ladies how to make a living from beauty consultancy.

She offers different training packages with the longest spanning 12 months. Vee enrolls in the training and pays the requisite fees. Midway into the program, she gets a job and decides she’s not completing the program again.

She asks Tola to give her a refund of the fees. Tola refuses and says she’s not entitled to pay her a refund.  After a lot of threats, including a threatened visit to the police station with Vee making a scene at Tola’s academy, she is forced to make the refund.

After the incident, she meets her friend and recounts what happened to her. Her friend tells her, that early in business, she learned to draw up terms and conditions for her clients who use her services.

That way refund policy, delivery policy, and other scenarios are expressly stated an agreed upon beforehand. She ensures that all the clients sign it to avoid problems in the future.

Tola, now wiser, has drawn up a written standard terms and conditions for her beauty consulting academy.

Do you have one for your business? What are your thoughts about a standard contract for your transactions with your clients and customers? Are they necessary?

Image: PUGB

Author 

Tosin Omotosho is a business lawyer.  She helps business owners give legal structure to their business and avoid liabilities caused by legal mistakes.  With a career spanning more than a decade, she has acted as counsel to organisations in the agriculture, advertising, real estate industries among others. An avid reader and writer, she is the Principal Partner, Charis Legal Practice, a law firm based in Lagos. Contact her here,   to read more of her articles, click here.

 

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Legal Business

5 Essential Contracts You Need To Protect Your Business Legally

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The Big Five, what are they?

Contrary to what you may think, having a written contract doesn’t mean you don’t trust the other party.  Rather it is to state what each party expects and understands from the contract expressly in writing, so the other party can review it and make sure they are both on the same page. Pronto. These contracts are basic and very essential and will protect your business from unnecessary liabilities, lawsuits, and embarrassments.

Occupying the top of the list is a Co-founders’ Agreement (or a shareholders’ agreement). Every company in Nigeria has at least two shareholders or co-founders, upon registering it.  Among other things, a co-founders’ agreement spells out remuneration, duties, decision making, succession planning, profit sharing, etc for the co-founders of the company. What happens if they want to sell the company, how much power would each co-founder wield? What happens if a co-founder wants to pull out of the company? Can he sell his shares to anyone he/she chooses? These and many more are stated in black and white. We don’t want disputes between shareholders to mar the smooth running of our business right? Then get a well-drafted co-founders’ agreement.

Another important contract is the Employment Contract.  Your business should have a standard employment contract for its employees.  What are the terms of employment? What are the duties of each employee?  Will some employees be allotted shares over time, how many shares and on what basis?  Is the company’s confidential information, which the employee will be exposed to in the course of working in the company, protected?  All these and more are what a standard employment contract spells clearly.

Third on the list is a Sales or Service Contract. What is the company selling? Tangible goods or intangible services? What are the terms of sale, any policy on refunds, can physical goods be returned and on what ground? What service packages are available, what are the details of each package?  What is the delivery policy for the goods you produce?  Who owns the intellectual property of products of the company? Every company should have a standard sales or service contract for the goods and services that it produces.

A Website Terms and Conditions. The internet has changed the way we do business. Transactions are being concluded online without the parties meeting physically. Almost every company has a website which serves as its online shop, store or office. A website’s terms and conditions state the terms of using your website for business. It is similar to a service or sales contract, the only difference is that it relates to transacting online or using your business website.

Lastly and very important is Rent or Land Purchase Agreement. Despite the rise of online businesses, most companies still have a physical address. The property could be rented or bought. Either way, ensure you have the proper documents entitling you to use the property.

Which of these contracts does your company have?  To get started with these big 5, click here to contact me right away.

Photo by rawpixel on Unsplash

 

About 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.  She has a decade of experience of active legal practice specializing in real estate and business law. An avid reader and writer, she is the Principal Partner, Charis Legal Practice, a law firm based in Lagos, which provides legal services for businesses. Contact her here, to read more of her articles, click here.

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