Five practical legal rules to start a startup The world of startups has already invaded Brazil in an aggressive and

innovative way. This scenario is a clear reflection of the economic situation that the country is passing through, and the extremely creative nature of Brazilians. Various events about startups take place on a daily basis, promoting environments to exchange ideas, present projects and set up business deals. The moment is unique for startups entrepreneurs who pretend to expand their ideas and for those that already use angels funds and venture capital. Investors are at risk with new ideas and projects in progress, but they seek a minimum of security when doing business. This level of security can be achieved by following some rules. To make dreams real it is necessary to beginners to follow some legal practices. Bearing this in mind, we present five basic legal rules to begin startups in a solid and organized way in the Brazilian market. 1. Beware of name and brand: Your startup, your idea, your project, will be known by a name, which eventually will be your brand. This name needs to be protected. And this protection can be achieved by trademark, what is considered an industrial property of its holder. But it is not any name that can be protected. Some rules have to be followed. It is necessary to check if the name is already protected, if it contains prohibited expressions, which class they will belong, and several other aspects. One detail (and the secret is on details) is that the protection of the brand/name may give an additional guaranty to the name used as an Internet domain of the portal of the startup. Although it is not enough to own the brand to to guarantee a domain name, this aspect is taken into consideration when different holders dispute a domain name. For example, there are many holders of the brand startup in Brazil, but just one of them is the responsible and can use the domain www.startup.com.br. Many aspects are considered before guarantying to a brand owner a domain with its brand Other intellectual properties protections need to be guaranteed, such as patents. Business models deserve specific approach, because the protection given to them is entirely different from the one given, i.e., in the US. 2. Know the rules of your business: Know the rules in which your business is inserted. Search for information about consumer law, rules of professional associations and regulatory agencies resolutions. Such analysis must be done before starting your business, because any rules against it may preclude it. To illustrate, if a startup create electronic service for doctors or lawyers it must observe the ethical limits provided by the Code of Ethics of the entity association. Did you know that, as a rule, doctors and lawyers cannot advertise their services in Brazil? So we indicate some websites to search for these rules, because it is a quick and explanatory method, which currently provide comments and understandings about those rules.

Therefore, big ideas must be legally feasible so that a startup can have sustainable growth. Not always what we want to create or do is legally possible. Hence, we recommend some previous legal research, trying to understand the legal environment of Brazil. 3. Develop the EMOU, or Memorandum of Understanding by the Entrepreneurs:

The founding partners of a project must meet to deliberate and prepare a simple document containing key information about how the company is going to be run. In such document we suggest: a) division of the profit sharing of each partner; b) role of each partner; c) the amount to be invested by each partner in the endeavor; d) how a departure of a partner will be dealt; and e) forms of remuneration. All these recommendations should be promptly discussed and formalized in a document called memorandum. It is natural that such information may change over time, but having something on paper is essential for solving conflicts among the participants. 4. Choose the type of society:

With the formalization of the basic rules of the society, entrepreneurs may take a new step, which is the choice of society model of the business. There are several types, but we suggest limited partnership system, which is characterized especially by the limited liability of its shareholders. That is, the liability of a shareholder is limited to the amount of shares he owns in the articles of association. Such a society has the nomenclature of "ltd.", and must be registered at the State Commercial Board in which it will be established. Articles of association is an instrument that must be prepared by a lawyer who will set some specific clauses for the business. For example: a) name and registered corporate headquarters; b) corporate objective; c) duration of the company; d) corporate capital; e) administration; f) resolutions of the shareholders; g) modification of the articles of association; h) transfer of shares; i) expulsion of shareholders; j) financial statements and profits destination; l) consolidation, merger, demerger and transformation; m) dissolution, liquidation and extinction; and n) venue of choice. Note that the EMOU is a preliminary version of the articles of association that establishes guidelines for the proper functioning of the company. Finally, we emphasize that the regular establishment of a company is an additional factor for investors to feel safe to apply the necessary capital into your project.

5. Celebrate non-disclosure agreements:

From where is a startup born if not from the dedication and sweat of its entrepreneurs? From an idea! And as much as ideas should be shared, rather than placed in reclusion for a small group, often the knowledge of an idea of a startup acquired by others can lead to ruin an entire project and lose the time spent. To avoid this, some measures must be implemented. Ideas are intellectual assets. Perhaps the most valuable asset of a startup. And the most effective way to ensure that ideas remain only amongst those who should know about it is by entering into non-disclosure agreements. But what are these agreements about? Non-disclosure agreements are contracts where the object is to ensure the confidentiality of the information disclosed between the parties (contractor and contracted). Both are required to maintain absolute secrecy and confidentiality about any information, data, documents, projects, files and any other materials, including information that they may have access in the future involving the startup. This document can also guarantee the rights of the holders of ideas, information, data, in case they leak, in a possible breach of confidentiality. If this scenario happens, the person responsible for the leak has to compensate the owners for damages. The amount of compensation varies from case to case. Thus, their ideas, and other information pertaining to your project, will be more protected from any free riders, who just want to take advantage of your work.

Golden rule: look for legal advice at all stages of development of your enterprise:

If we could get all these rules above, mixing them to extract only one, would be this: always seek legal advice. As unnecessary it may seem at first, and the more expensive and out of the budget it may appear, it is necessary. Using an old clich: the cheap can become expensive. Only through a good guidance the foundations of your company will be firm. And only with a firm foundation the company will be able to grow.

Authors: Renato Asamura Azevedo, Partner of Rulli Advogados Associados, Co-founder of Kombini Oriental Products, and law consultant at Jojoba Eco. Renato Leite Monteiro, Lawyer at Opice Blum Advogados Associados, Masters degree in Constitutional Law, Member of the Instituto de Direito e Tecnologia da Informao.