As a founder, you will always seek investors at some point in your business. That can become a full-time fruitless job on its own if you are not able to tick the right boxes, which will help you get the attention of “money” on time.

Active Investors need to see more beyond just your good ideas…

They need to see how their interest is protected which is where legal comes in.

This is also one of the reasons I always remind smart business owners and founders that legal is one of the top three essentials they must consider from the start.

Today, I want to quickly share with you some tips that will help you to better position yourself from a legal standpoint to appeal to investors.

Incorporate properly: The first step is getting the right legal structure.

 Investors are usually more comfortable with startups that are structured as private limited companies (not a one-man business or sole proprietorship).

This gives them clarity on ownership, liability, and a legal framework for their investments.

It's hard and almost impossible to find serious investors if you have decided to keep your company as an enterprise.

Is your company properly incorporated and structured?

Protect your intellectual property (IP). Investors want to know that your idea, brand, or technology is protected.

They don’t want to see you fighting IP theft battles instead of just focusing on making money and keeping your stakeholders happy.

If your startup relies on proprietary tech or branding, protecting your IP will give investors the confidence that your business has a sustainable competitive edge.

Have you registered your trademarks, copyrights, or patents?

Clear shareholder agreements.  From the get-go, make sure you have solid agreements in place with any co-founders, early investors, or key employees who may own equity.

These agreements should outline who holds what shares, how decisions are made, and what happens in cases of disputes or exits.

 This kind of legal clarity helps investors see that they won’t lose their money due to internal conflicts.

Cap table transparency: One of the first things an investor will look at is your capitalization table.

 It should clearly show who owns what percentage of the company, if there have been previous rounds or raises and how much equity has been diluted so far.

A clean and well-organized cap table is a sign of a legally sound business that knows what it’s doing and is ready for investment.

Do you have a cap table?

Legal compliance and licenses: Ensure that your business is fully compliant with industry regulations and has all the necessary licenses to operate.

A lot of business which might include you reading this now might not have even filled your annual returns for a long time now!

Hmm.

Shaking my head.

Some of you even are operating in a licensed environment without knowing because you were not properly educated.

Things like these will raise serious concerns during the due diligence process…

Investors don’t want to find out later that you’ve been running without proper legal documentation or the necessary licenses because they know much that will cost you in terms of lost time and money when the law catches up with you.

Have you filled your annual returns?

Contractual obligations: If you have key partnerships, clients, or suppliers, make sure you have formal contracts in place.

Investors need to know what that your obligations are legally documented and not just based on verbal promises. It shows that your revenue streams are secure and enforceable should there be a bridge.

Equity and employee stock options: If you plan to incentivize employees with stock options (which I encourage if you want to attract and retain talents who you ordinarily might not afford), ensure that your Employee Stock Ownership Plan (ESOP) is legally set up.

This adds value to your company, showing investors that you're thinking long-term and that your employees have skin in the game.

Due diligence readiness: Before you approach investors, make sure all your legal documentation is in order. This includes your incorporation documents, IP registrations, contracts, shareholder agreements, financials, and any regulatory filings.

 A startup that can quickly produce these documents in the deal room stands out in the eyes of investors.

Investors aren’t just looking to put money into your idea—they want to invest into a business that’s legally structured and has a better chance to grow and succeed.

Making sure your legal framework is solid not only builds confidence but also protects your business in the long run.

I hope you found something useful here.

To your #legalsense

Barinaada.

(for Barinaada Legal)

P.S. The Business Legal Structure (BLS) is designed to help smart founders and business owners put the right legal structure in their Businesses. If you desire to join the next cohort, reply to this email and we will get to you with all the necessary details.