Start-up. But where to start

Image: Agnieszka Wiercińska-Krużewska

Agnieszka Wiercińska-Krużewska, Lawyer, Senior Partner, WKB Wierciński, Kwieciński, Baehr

Most business ideas never leave our heads. Some pass after being shared with family or friends. And only very few of them reach the execution phase, not to mention, successful market exposure. What are the most common problems and obstacles: lack of faith, no support, lack of financial resources and confusion about where to start! The first question that pops up when people think of business ideas is: how can I protect it? Can someone else copy my idea? How can I start discussing my business idea if I don’t trust my potential business partners, who can easily do the business without me, because they have money or some other necessary resources? The simple answer is “No, a business idea (as any other idea) is not protected.” In general, it is free to be copied. Therefore one must take some measures to protect the idea from being used by someone else.

The idea can be protected contractually – we agree (in writing), with people to whom we disclose the idea, that the information is confidential and disclosing it without our consent constitutes a breach of the contract between us. The lawyers call such an agreement – a confidentiality undertaking or NDA (non-disclosure agreement). If we are thinking seriously about our future business, we can provide for contractual penalties (a fixed amount of money) for any unauthorized disclosure.

The idea, if nicely described (if such description is of individual and creative character), may become a copyrightable work and therefore protected against copying based on the copyright law. For example, many companies “codify” manuals on how to do business. These manuals provide for details on how the idea must be implemented (for example franchise chains), name the idea and protect (register) the name. Many ideas become popular and distinctive because of a catchy name they are given. The idea is associated with a brand. It is recommended to register such a name and all complementary necessities
domain, logo) in advance.

The above is relatively easy when the idea comes from one person and this one person is able to obtain proper financing. One person can operate as a sole entrepreneur (registration is necessary) or as a wholly owned limited liability company (often owned and governed by the same person).  But in many cases, either the idea comes from a group of persons or such group of persons (entities) is necessary to start the business. In this case, we need to think about creating a “partnership.” As long as individuals cooperate with each other to achieve a certain goal, they most likely operate as a civil law partnership. This form is very flexible, however, in case of failure, partners are responsible for all debts with their own assets and it is also difficult to separate (define) their contributions.

This is why the most common form used for a start-up firm is a limited liability company (Polish: sp. z o.o.). Such a company, in order to be registered, must have the so-called Articles of Association. In case of start-ups, it’s worth considering a shareholders’ agreement where the owners agree on how they want their business to be run. Unfortunately, many businesses wither because their owners (partners) disagree on the day-by-day operations or the strategy of the business. The shareholders agreement should serve as a guideline for such an operation, but also as a solution agreed upon in good times for the bad moments.

All of the above steps are important but they are irrelevant if the idea does not “come out.” For starters, we should believe that some ideas grow into businesses and it’s worth trying the one we have!

Pin It