I.Setting up your company
People often think that founding a company requires a huge amount of initial capital, takes up your entire life, and produces endless amounts of stress. In fact, setting up a business will typically not cost that much. You also don’t need to jump head first into the unknown – you can start by setting up a business on the side while still keeping your current job.
When is the right time to found the company?
This is the million dollar question – and you’ll find as many answers as there are people who have founded companies. Some companies begin as side hustles (intentionally or unintentionally). Some people start their companies because they need a job or feel like they can’t work under someone else. Some people are tired of how the company they work at does things in an unscalable way, so they start their own company to fix those issues. Some people sit down every weekend to develop new ideas with the explicit goal of starting their own company at some point. And some people save half of their salary for years in order to feel secure when they start their own company.
When it comes down to it, there is no right answer – but we can hopefully shed some light on how to go about doing it and some things to consider first.
What is required to set up a startup?
Starting a company can be somewhat different depending on where you are located. In Finland, you can do everything online by filling out a form, opening a bank account and transferring the initial capital (if you want to dive deeper into this you can go to www.ytj.fi/en). The procedure can be very different in other countries and might have to fill in paper forms and go visit an office in person in order to register your company.
In practice, becoming an entrepreneur requires a little more thought than just filling out the paperwork. Before setting up a business you should consider at least the following: what your company does, how your business generates revenue, how much will it cost, where do you get the right people for your team, and where will you find financing for your business.
Let’s dig a little deeper into the actual documentation needed. In most countries and jurisdictions, a memorandum of association is needed in order to form a company. The memorandum usually has to include that the founders agree to form the company, the share price, total number of shares, the business name suggestion, financial period, managing director, composition of the board and auditor information. Again, the requirements vary in different countries, so this is just to give you a general idea.
Usually you also need to attach a draft of the company’s articles of association or articles of incorporation to the memorandum. Together, these two documents form the constitution of a company. The articles of association have detailed rules on how the company will be governed. The exact legal requirements and voluntary things that can be added varies, but often each country publishes some example or might even give you a standard template to work from.
When you have done these and sent them to the responsible authorities, there are usually a lot of other registers you will probably have to inform as well. These can include things like the VAT register, employer register, etc. You will also have to talk to a bank in order to open a bank account to start receiving and using money.
As said, you will also have to make the first choices of board composition and company ownership when registering the company, but these choices can or will be changed in the future.
Legal and finance for startups
The rest of this chapter and the next chapter (about financing for startups) might feel complex and hard to understand – but there is a reason for including this material. A startup has to deal with many legal and financial issues and if they are not done correctly they can have critical consequences. When you are dealing with investors or making contracts with big customers, they are probably much more experienced in this area than you are, which is why it’s important to at least be familiar with the terms so you can get a good deal.
Your accountant and lawyer
Many people learn the tricks of accounting to save money, but in practice a good accountant will always do better than an enthusiastic amateur. First of all, your company is more likely to succeed when you focus on the things you are really good at. Secondly, if your business starts to thrive, you don't want to run into problems with the tax authorities because of incorrect accounting practices. And thirdly, having a good accountant is a staggering help when you're dealing with the many layers of financial management.
For a startup entrepreneur, we also recommend that you get a good lawyer, and not to protect you from potential lawsuits. Instead, a startup entrepreneur has to deal with complex contractual arrangements, trademark applications, and patent applications very quickly. Without a good lawyer, you'll be likely to shoot yourself in the foot at some point.
A startup entrepreneur will have to make dozens or even hundreds of different contracts. Employment, investment, shareholder, partnership, subcontracting, and various letters of intent can be dozens of pages of legalese and fine print. If you sign your name on a piece of paper that hasn’t been read by a knowledgeable lawyer, you will be playing Russian Roulette – with the future of your company at stake.
Just as a good accountant ensures that your business finances are run according to the law, that the tax authorities receive their dues on time and that the records are properly documented, a good lawyer will help make sure that your contracts are legal and also drafted in your favor. So the job of a lawyer is to make sure that you don't agree on things that would unknowingly be illegal, and that you are not going to negotiate stupid things. Of course you ultimately decide – and take responsibility. But a good lawyer can make smart recommendations even in tough negotiations.
A good lawyer costs a lot of money, as does a good accountant. But it is very likely that the help of a good lawyer will end up saving you a lot of money. So it's actually one of the smartest investments you can make.
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Kiuas is one of the leading startup accelerators in the Nordics, bringing early-stage startups together and providing them with the best support and tools to take their progress to the next level.
Maki.vc is an early stage venture capital firm dedicated to partnering with founders who never conform to category standards.
AVP is the entrepreneurship education program at Aalto University. Students in multidisciplinary teams do hands-on exercises and gain tools, ready to be used to construct a startup or to renovate an existing company. We teach students to build like an entrepreneur.
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