The recipe for founding a company appears to be relatively simple and it is easy to find out how to establish a limited liability company. However, many people find that choices made when setting up can be costly or inhibit growth at a later stage. As soon as an organization number is allocated, requirements and obligations to which you are subject as a company come into effect. Business owners and entrepreneurs often make decisions without knowing the consequences of the choices they make, or they make choices with a short-term focus.

You have been working with an idea for a new product, or a new business model, for a short or long time. Then you decide to jump in and make your dream come true. Some have extensive experience in setting up new businesses, others have no experience. Where do you start, and how do you get your business up and running?

A classic trap

A classic entrepreneurial trap is that the top manager in a start-up company takes on the role of "artist" who must both develop the company's idea, and in addition be responsible for administrative tasks, accounting, liquidity, public reporting, salaries etc. Working days tend to get longer and longer, which can come at the expense of the necessary focus on the core activities that are central to ensuring that the company will develop and succeed.

Wrong choices are often expensive

Many entrepreneurs have little or no experience in setting up a company and realizing an idea. In an early phase, as an entrepreneur, you make many choices without knowing all the options, and lack knowledge of the long-term consequences of the choices you make. Later in the development course, your company may have to accept the consequences of these choices, which can be both costly and inhibit further growth.
Here are some tasks that are important to put in place during a start-up phase:

Accounting

The company will need a simple and cost-effective accounting system. At the same time, the system must provide the overview that management needs, such as in capital and liquidity management, efficient reporting and follow-up of projects with public subsidies. In addition, the system should be scalable as your company develops.

Legal

Already at the foundation of the company, questions arise regarding ownership distribution and regulation of ownership. In many cases, the entrepreneurial team agrees on how ownership should be managed and has often entered into verbal agreements. You don't see the need for a shareholder agreement until a conflict arises between the owners. Another decision that is taken when setting up is whether to have ownership in the company directly or through a holding company. Many people make this choice without knowing the advantages and disadvantages of the various structures. As the founding team settles in, it is often necessary or desirable to distribute the shares in the company between the founding team and/or the first employees. Such a redistribution of values ​​can have a significant tax consequence, both for the person giving up and the person receiving shares. It is important to be aware of these issues, and the consequences of the choices you make.

We recommend that the company keep an overview of all non-recorded obligations and agreements and formalize these in a set of agreements. By structuring the agreements in an archive system, you will save a lot of time when raising capital, and you appear better prepared for investors. It builds trust. 

When it comes to contractual documents, there are good and standardized templates for this, which in many cases are a good starting point. However, we always recommend going through the agreements with professional expertise before signing the agreement. This is to ensure that the consequences, tax-related as well as legal, are highlighted and explained, as well as that the agreement is adapted to the specific circumstances of your company. 

Legal assistance is often considered an expensive service, and many therefore choose to seek help from other entrepreneurs in the same situation. However, be aware that they may also not have an overview of the consequences of the choices they make. One example is the Kruse-Smith model, which more and more entrepreneurs are using - a set-up which for many solves a concrete problem around share-based remuneration. But it can be risky to set up the agreement based on a standardized contract, without a specific review of expertise that is familiar with the model and the specific court decision on which the model is based.

A cost-effective solution could be to use an available template, and based on this think through what you want to achieve with the agreement. You then confer with professional expertise before the agreement is signed by the parties - this can save you from expensive legal fees or legal disputes later. Already at the first capital increase, missing or bad agreements can become problematic.

Financing

Financing of the start-up phase is for most a combination of public grants and deposits from owners. Navigating the jungle of grantmakers and foundations is often time-consuming, and in many cases entrepreneurs spend a lot of their time doing this. You risk having to spend all your time reading about various grants, writing applications, participating in competitions, attending lectures/seminars and trying to "pitch" the company to angel investors. Many do this with a desire to get as much capital as possible, others' motivation is the least possible dilution. The capital strategy is not anchored in a conscious assessment of capital needs to move the company on to the next phase. In many cases, this means that the company gets off to a slow start, or places the company's value at an artificial level early on. Even if the company feels that it is succeeding in its goal of raising a lot of capital or preventing dilution, the consequences of this in many cases are that later rounds of financing become more demanding.

We recommend that the company draw up a strategy for the first development steps with an associated capital plan. Throughout the phase, the company should have established the first hypotheses about customers and the market, including the value hypothesis, and a plan for how these are to be tested. Investors are generally concerned with return potential and risk. The company should take this into account in its plans right from establishment. m you have capitalized with sufficient funds to manage from start to completion of the project.

We can assist you whether you need a sparring partner or need practical assistance with start-ups and foundations. Examples of what our advisers can help you with:

• Prepare, possibly quality-assured, foundation documents.
• Prepare a customized shareholder agreement.
• Prepare document packages and routine work related to the implementation of board meetings and general meetings.
• Selection of an accounting system that provides the most cost-effective service and that is adapted to the company's growth ambitions.
• Deliver a customized and cost-effective accounting service.
• Establish the necessary routines related to reporting to public authorities.
• Prepare cost-effective reporting solutions that ensure the company good accounting reports, a clear project account, and liquidity forecast 12 months ahead.
• Preparation of employment agreements and incentive programs
• Assistance in identifying sources of funding for the company's start-up.
• Assistance with preparing application documents for public support schemes.
• Assistance with preparing the necessary documents to carry out an equity issue.