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Legal Considerations to Get Your Startup Ready For Investors

Legal Considerations to Get Your Startup Ready For Investors

Your startup needs investors to get off the ground and grow. However, investors do not just invest in any businesses. They tend to look at all legal aspects and requirements of a business before investing their time and money.

Before getting investors to invest in your business, it is helpful to refer to commercial law to ensure that your business can provide all necessary legal documents and transactions. Commercial law is the branch of law that deals with contract law, business law and tort law. 

Why is it important to know commercial law? Because it can help you get investors for your business.

Read on to learn what legal considerations you should have for your startup to be ready for investors.

Different Stages of Funding

There are many different ways to fund a startup, and the best time to get investors may vary depending on the stage of the startup.

Here are three stages of startup funding and when to seek investor help:

  1. Pre-Startup

During this stage, a startup is in its early development stages and may not have any products or services ready for sale. The focus should be on building a solid team and developing a business plan. This is the best time to seek angel investors or other early-stage investors.

  1. Early Stage

The focus at this stage should be on expanding the business and increasing revenue. This is the time to seek venture capitalists or other more established investors.

  1. Growth Stage

The focus here should be on growing the company and increasing profitability. This is the time to seek angel investors or other more sizeable investors.

Who Are the Business Investors and What Do They Do?

A business investor invests in a business, usually intending to make a return. They typically do this by buying shares in the business or by lending money to the business. Investors are wealthy people who want to make money through their investments.

Types of Investors

There are a number of different types of business investors, each with its benefits for a business.

  1. Private Equity Investors are typically the biggest and most experienced investors in the business world. They’re generally interested in buying a company outright rather than investing in its stock. This gives them a lot of power and control, which can be good or bad, depending on the situation. 
  1. Venture Capital Investors are typically much more hands-off than private equity investors. They’re interested in investing in companies to help them grow and scale quickly. This can be a good thing if you need help getting your business off the ground, but it can also be a bit riskier.
  2. Business Angels are the smallest and newest type of investor. They’re typically individual investors who invest small amounts of money to help startups grow. This can be a great way to get started in the business world, but it can also be risky.

Benefits of Having Business Investors

Investors are vital to any business. They provide the capital necessary to grow and succeed. They also provide valuable feedback and advice that can help you improve your business.

Here are five benefits of having investors in your business.

  • Capitalise on opportunities. Investors can help you identify new markets, products and services. This can lead to increased profits and growth.
  • Provide financial stability. Financial stability can help you avoid unexpected financial setbacks.
  • Provide guidance and feedback. Guidance and feedback regularly from investors help you improve your business.
  • Provide advice and support. Advice and support during difficult times can help you overcome challenges and succeed.

Improve team morale. This can lead to a stronger team that can achieve success.

Legal Considerations Before Approaching an Investor

As a startup, securing investors and building a strong team of supporters is essential. However, a few key legal aspects must be considered to achieve these goals. 

  1. The first legal consideration you need is obtaining correct intellectual property (IP) protection. If your startup idea is IP-protected, you must register the patent or copyright with IP Australia. This will ensure that you are the rightful owner of the IP and can enforce your rights in court.
  1. Your startup will need to determine the correct tax treatment for its activities and ensure that it is filing accurate tax returns. If you are not tax-compliant, you may suffer from penalties, including fines and imprisonment.
  1. You must comply with all applicable federal, state and local laws. This includes ensuring that the company is registered with the appropriate government agencies and abiding by all applicable tax laws and health and safety regulations.
  1. Your legal structure will dictate the responsibilities and liabilities of your company. For example, a sole proprietorship will give you personal responsibility for your company’s debts, whilst a partnership will distribute profits and share liabilities.

Commercial law can be helpful when seeking investors for your business. It can help ensure that your company is legally sound and that the terms of any agreement between you and investors are fair. Additionally, commercial law can help protect your rights and interests in a transaction.

What Do Investors Require from a Business?

In addition to legal considerations, investors need to see the following key aspects of a business before handing you the funding that you need:


Your company’s taxation will depend on its legal structure, activities, and location.


Investors want to see strong financials before investing in a startup. You should clearly understand your company’s financials, including its cash flow and balance sheet.


Investors want to see a clear vision for your product or service. Are you targeting a specific market? Will your product or service be profitable?


Investors want to see a high level of risk associated with a startup. They want to know that their money is going to be well invested. However, you must also be realistic and discuss the risks associated with your startup.

How to Find Investors for Your Startup

There are a number of ways to find investors, and it all depends on your business and what you’re looking for in a partner. A few tips to get started are:

  • Network with other business owners.
  • Attend business incubators and accelerators.
  • Search online for angel investors.
  • Reach out to your family and friends.

Once you get investors for your business, you will still need assistance from a commercial law firm regarding your contract and agreement. The agreement between you and your investors must abide by commercial law to ensure that everything is fair and legal.

How Madison Marcus Can Help You

Without business investors, you won’t be able to get funding for your startup business. However, it can be a challenging quest to find the right people to invest in your business.

Madison Marcus can help you understand the theories and facts surrounding commercial law. We are the leading commercial law firm in Sydney and have a wealth of experience in negotiating and closing deals with investors. Our team can provide you with guidance and support throughout the process. We know the importance of working with the right partners, and we’ll ensure that you partner with the right individuals to get the best possible outcome.

For all enquiries, contact us here.


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