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Issues To Be Considered For Those Who Will Build A Startup

Today, with the technological advances, a new business idea appears every second in a corner of the world. In this context, the concept of "STARTUP", which has just started to enter our vocabulary, is used for companies that have started a new business idea, a new venture. What we mean here are the types of companies that are customer and user-oriented, and aiming to reach large masses from small audiences in a short time. Startup model, has been increasing recently in Turkey. Considering that the aim is to create from scratch, it is seen that many of them ended in defeat in their first years as many difficulties and obstacles were encountered from the first stage of the installation.

In order to commercialize the Startup Project, to reveal an income-generating value, in other words, to ensure a successful installation, it is necessary to mention some important points. Because, in order to take professional steps from the first stage, it is essential to create a solid and legal basis. Completing these requirements is also very important for future investor searches. So much so that when investors decide to invest in a Startup, they are not only evaluating the idea, but also whether the values created by the project have a correct financial and legal structure. For this reason, the main legal points to be considered as an entrepreneur are briefly listed below:

1- Startup’s Compliance With Law

In order for the Startup established to be legally protected, it is required to comply with the law in terms of both the subject of the initiative and the activity (procedure) of the enterprise. Therefore, the Startup should not be against the legislation in terms of subject and activity, it should not contain an element of crime, it should not violate the intellectual and industrial property rights of other enterprises or companies and it should not compete unfairly with other enterprises or companies. In this context, especially the subject of ventures should not be against the mandatory provisions of the law, morality, right to life, commercial life, public safety and health. It is necessary to determine the legality of the product or service subject to the local legislation and to determine the compliance with the laws of these countries in cases where the venture is an international venture. In addition, if the activity in question is about the product, the sales procedures, the raw material or content of the products, if the activity is about the service, the legality of the service and the way the service is provided should be investigated. Another point that should be considered is that the venture should not violate the rights of third parties.

2- Protection of the Startup to be Established

For an entrepreneur, it is obvious that the idea subject to the initiative is worth protecting. It is necessary to review the structure that may occur in the future at the idea stage and to provide appropriate protection for this structure to be formed. For this reason, it would be appropriate to say that intellectual and industrial rights are of great importance in the protection of a Startup. In this context, if a few basic protections are mentioned;

  • Trademark: A trademark, registered or under application, can be transferred to someone else, can be inherited, the right to use can be licensed, pledged and can be shown as a guarantee. It should be investigated whether the trademark to be registered has been registered by someone else previously.

  • Patent: In order for an invention to be granted a patent certificate, the invention in question must exceed the known state of the technique (inventive step) and be applicable to industry. It becomes the property of a patented inventor.

  • Utility Model: It has been adopted in terms of inventions that cannot be protected by patents but are considered useful and necessary to protect it because it contains technological innovations. Even while a patent certificate can be obtained, the inventor may prefer utility model protection to obtain cheaper and faster documents. It is preferred by the entrepreneurs more than the patent because it does not have the examination stage as in the patent, it is easier to register and it does not cost as much as the patent.

  • Copyright: In order for a product to benefit from copyright protection, it must have the property of its owner and must fall within the scope of one of the types of products that are defined in the law. copyrights are absolute rights. The owner can benefit from legal protection against anyone who violates it. However, this right does not provide unlimited protection under all circumstances. Public interest, general morality, public order, etc. reasons may require the limitation of the right.

    It would be more appropriate to make the necessary applications for the mentioned protection types at the product development stage, before the product is released to the market. This way, it will be possible to prevent the possibility of malicious third parties acting first. It will be correct to determine the most appropriate protection for a startup, to investigate whether there has been an application previously, and thus to minimize the possibility of rejection or cancellation of their application.

3- Choosing the Right Type of Company

The choice of company type determines how the state will tax your company, how to protect company assets and partners in case of a mishap, and the investments accepted for the venture as the obligations and responsibilities will vary according to the preferred company type. For this reason, a company type should be determined in line with the characteristics and objectives of the enterprise before establishing a company.

Individual companies or any of the capital companies may be preferred for the venture. However, it is worth noting that it will be more advantageous in terms of responsibility to choose capital companies over private companies. Namely, while the partners are liable with all their assets in a Sole Proprietorship in terms of company debts, they are not personally responsible for Limited and Joint Stock companies.

Apart from this, it is obvious that many more important details should be examined in determining the type of company, depending on the Startup subject and activity mentioned above.

The main ones are the legal and criminal liability of taking part in the

company's organs, the functioning of the general assembly and the board of directors, meeting and decision quorum, the degree of responsibility, the minimum amount of capital, and tax rates. However, it should be emphasized that these are not limited in number but are likely to be increased.

4- Investment Process for Startups

Receiving investment is important for the Startup to develop, expand and profit. In this process, many contracts are signed between the investor and the entrepreneur.

A confidentiality agreement must be signed if the verbal conversations between the investor and the entrepreneur reach a certain maturity. While the confidential information of the enterprise will be protected with the confidentiality agreement, the confidential information that the investor will share with the entrepreneurs will be protected. After the verbal agreement is reached and the confidentiality agreement is signed, an approximate value should be determined for the venture that will be subject to the investment and the framework of the investment should be drawn with the Term Sheet. In addition, a Legal and Financial Review Report (Due Diligence) should be prepared for the investigation of the company, entrepreneur, business idea and the market during the investor's investment process. After all these, various contracts must be signed between the entrepreneur and the investor, by writing all kinds of stages according to the needs. The most common of these are the Share Transfer Agreement, which transfers a part of the existing shares of an enterprise that has been turned into a company, and the Shareholders Agreement, which determines the future management and roadmap of the enterprise and how the relations between the shareholders will be.

While choosing the investor, it is especially important to conduct trade registry records, company capital and partnership structure, brand or industrial property research and domain research. In addition to these, making rigid and strict binding declarations and commitments in presenting the Startup may create problems for the future period. Therefore, the nature of the contracts to be signed must be drawn correctly.

5- GDPR Adaptation Process for Startups

During the establishment and growth stages of the Startup, it is possible to experience difficulties about which personal data are accessed, at which point they’re accessed, how they are processed, stored and destroyed.

However, it should be noted that, in the current legal regulation, there are already various limitations and obligations regarding data collection, which will be applied more frequently during the establishment process. For this reason, planning within the framework of the articles of Personal Data Protection Law is of great importance even in the work to be done with the potential customer, which is still in the first stage.

As a matter of fact, every company hosting, processing, storing personal data should operate in accordance with Personal Data Protection Law. Since the protection of personal data is a Constitutional right and a high amount of sanctions are imposed by the relevant Institution in case of violation, a harmonization process is necessary for the protection of personal data.

As the company takes action in accordance with the Personal Data Protection Law, it will create strong bonds of trust between the target audience and the Startup, making it easier for individuals to share data such as name, contact information, address, signature with the company.

It should also be noted that there are other issues that should be considered regarding the Startup, apart from the headings briefly explained above. For example, in order to prevent the tax and legal problems of the Startup to be established, it is important to keep your commercial books duly starting from the establishment of the company. In addition, it is of great benefit to add Confidentiality and Non-Competition Articles to the employment contract to be made with employees to protect the venture and the value it creates. Apart from these, if a website-based business model such as e-commerce is to be created, various contracts such as site usage rules, privacy and personal data protection policy, membership agreement and distance sales agreement must be prepared.

Startups should be progressed by ensuring compliance with the law from the very first moment that they started to be formed. Otherwise, irreparable problems will arise and these will result in huge financial losses.

Therefore, it is very important to be based on concrete legal foundations and act in accordance with the law in terms of the subject of the enterprise and the whole activity from the very beginning. In this context, it is essential for the entrepreneur to receive legal services in line with the goals to be achieved in order to take action after legal evaluations specific to each new situation. Thus, it will be easier to ensure that activities are carried out in accordance with the law, to prevent legal disputes, to protect initiatives and to increase profit margins by growing.

Startup Kuracaklar İçin Dikkat Edilmesi Gereken Hususlar

Issues To Be Considered For Those Who Will Build A Startup

Av.Eda ATASÜ, Yasal Stajyer Yelda UÇAR, Yasal Stajyer Sezin ERGÜNER

Av.Eda ATASÜ, Junior Associate Yelda UÇAR, Junior Associate Sezin ERGÜNER