Pitfalls facing new companies
Written by Maarit Jokela
When you set up a company for the first time, you will be dealing with many unfamiliar things. You may even come across a pitfall or two. The following tips from experts can help you pay attention to the right things.
I talked to two IPR experts about the pitfalls facing new entrepreneurs when making a podcast for our IPR course. What mistakes should you try to avoid when establishing a company? Ari-Pekka Launne from Evkan Oy and Suvi Julin from Berggren Oy, both with a background in law, highlighted two common problems.
Choosing the company name
When you set up a new venture, it is important to choose a good company name for it.
You can get exclusive right to the name by registering it or by using it to the extent that it is considered well-established in the field. Registering the name in the Trade Register is the easiest and fastest way to obtain exclusive right.
Exclusive right to a company name means that no other entrepreneur in Finland is allowed to use a name that might be confused with a registered company name, unless they can demonstrate that it will not cause any harm.
A good company name is catchy and concise and supports the company’s business. It is also important to obtain a domain name ending in .fi or .com, for example, for the chosen company name.
When considering suitable names, people often type the potential candidates in a search engine. However, this might cause problems.
“When you google a potential name, you also indicate that the related domain name might soon become unavailable. The prerequisites for registering the company name may also be lost if searches for the name become public,” Ari-Pekka Launne points out. This is because search engines begin to display the name in search results.
You also need to be alert when exploring available domain names.
“There are services and sites for searching domain names that act like fly catchers. They enable you to check whether a domain name has already been taken. If not, the service tells you that you have just signed up as a potential buyer, and the price is many times greater than normally. It pays to be cautious when planning and researching the name,” says Launne.
IPR professionals have tools for safely examining alternative names. The Finnish Patent and Registration Office also offers a free name checking service that entrepreneurs can use. The service looks for the name in various places, including the Trade Register and trademark databases. However, the search does not encompass .fi domain names, names of associations or EU trade marks.
Shareholders’ agreement
If the company has one or more founding members/owners, it is important to conclude a shareholders’ agreement. This is often considered an unnecessary, costly piece of paper.
“You want to believe that since you’re friends now, you’ll remain friends forever,” says Launne.
This may be true at first, but things may change, for example, if one of the owners wants to leave the company or the partners have trouble agreeing how to develop the company.
The partners’ rights and obligations are determined in the shareholders’ agreement. The purpose of the agreement is to promote the achievement of goals and prevent disputes between the partners.
“A shareholders’ agreement is the first and most important agreement for a startup company and one that really must be drawn up. Believe it or not, it is absent in way too many cases,” says Suvi Julin. The absence of a shareholders’ agreement often leads to disputes that end up being taken to court.
Although concluding agreements may require additional time and money, failure to do so is not necessarily a good option. “This is one of those ‘save in the right place’ kind of tips,” says Launne.
Further information
This blog text is based on a podcast, in which I discuss these questions with two IPR experts: Suvi Julin from Berggren Oy and Ari-Pekka Launne from Evkan Oy. This podcast is the first in a four-part series on IPR, which can be found at the MY studio (Mikroyrittäjän studio).
Maarit Jokela
Innovation Manager
+358 40 355 9660, maarit.jokela@oulu.fi
IPR, technology transfer, commercialization of research results, bio- and medical sciences, Proof-of-Concept funding, innovations, communication on innovations, IPR trainings.