To run a successful business, your team must work well together. The best ways to ensure smooth co-operation is to discuss and agree as much as possible what goals you have for your business, what are your shared values and how you are going to work together to reach those goals and follow the values you have chosen.
To agree on these, it is important that the team spends enough time together discussing the different aspects of their co-operation. Once the team has reached agreement on how to operate, it is very important to at least write down what has been agreed. In this way everyone is on the same page and it is easier to resolve future conflicts when the team can refer to their (well documented) agreements.
When you start out working on a new business together with a new team, there often are at least three phases for the co-operation. Here are some tips for what to agree on for the different phases.
Initial, often loose co-operation before incorporation
You don’t need to form a company to do initial exploratory business development, in fact it can often be beneficial not to set up a company (incorporate) too soon. As soon as you have a company, you will have a number of responsibilities and incorporation often cost some money.
Even if you do not set up a company, you should agree on the principles for your work. Here are a few things to think about:
Set a clear timeline for your initial co-operation. Will you work together for a specific time or until you reach some goal?
Availability of each founder. How much working time is each participant willing – and perhaps more importantly, able – to use on the joint project.
Recognize what assets each member brings to the co-operation and how the ownership of those assets will be handled. Typical assets could be code, data, physical things such as a computer or a car, etc. For example, if one team member brings some software (to which that member then has copyright) you should agree on terms under which the copyright is licensed to the company that might be the result of the co-operation. Also consider what happens to the (possibly modified) code if you decide not to continue?
Who will have the right to use what you create during the co-operation? It is especially important to agree on the rights in case you do not continue the co-operation. What rights does a person get that does not join the company in case the company is formed by only some of the participants in the initial co-operation.
Use of money. As you have not formed a company, any money spent is someone’s personal money.
This agreement can be put together by the persons wanting to start out on a common journey; you don’t necessarily need a lawyer to write it. However, if there are some really valuable assets at stake, then it might make sense to consult a lawyer already at this point.
It’s important to understand that an agreement like this is hard to enforce if someone breaks it. Therefore the agreement should be used to guide your day-to-day activities. So for instance, if you agree that everyone should have access to and the right to use the code that you create, then you should set up a shared repository. The way you handle you daily operations is the best way to ensure that the spirit of the agreement can be followed even if you end up with disagreements later.
A Shareholder’s agreement becomes important when you actually set up a company. The most typical form of business (at least in Finland) is a limited liability company (in Finnish osakeyhtiö or oy for short). In a limited liability company the founders work in many roles. The shareholder role refers to the role of the founders as the owners of the shares, shareholders, of the company. The laws governing a limited liability company define some aspects of the ownership and rights and responsibilities that come with being a shareholder, but the law is very limited. Therefore shareholders need to agree on how to work together and how to handle common situations related to growing the company.
While the initial agreement discussed above can easily be drafted by the participants, a Shareholders’ agreement should always be finalized with the help of a lawyer. The best process to work towards a Shareholder’s agreement is to first have a discussion about how you want to operate company and in particular, how you want to grow it. When the founding members have reached an agreement, then the lawyer can (and should) be used to finalize the document and ensure that it is formally correct.
Agreeing on how to operate does not stop when the company is formed, in fact it intensifies. However, in the operational phase, you should instead of writing lots of rules, agree on good working practices. How do you work and how do you make decisions? What daily/weekly/monthly routines do you follow to make sure everyone is involved and working in the same direction.
During operations, many things will change. It is also important to ensure that the written agreements that you have set up are amended as needed if things change. For instance, the shareholder’s agreement is typically re-written if a major investor comes on-board. Also if the team composition, for one reason or another changes, can it be relevant to amend the agreements.
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