Purchase Orders & Invoicing

June 25, 2017

A Purchase Order is a document between a supplier and a buyer that confirms a purchase. It details the items the buyer agrees to purchase at a certain price. It also outlines the delivery date and terms of payment for the buyer. Purchase Orders make the purchasing process more efficient and allow for better inventory and payment tracking.

An Invoice is a document issued by a seller to a buyer. It identifies the seller and the buyer, the items sold, the quantities, the prices, any discounts, and delivery and payment terms. An Invoice also serves as a demand for payment and hence helps a healthy cash flow.

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Other Documents you need when Raising Capital

Shareholders’ Agreement

Once the investor acquires equity and becomes a shareholder, this document will be required. It sets out the investors’ (shareholders’) rights and obligations. It also includes information on the regulation of the shareholders’ relationship and ownership of shares, and clauses relevant to the privileges and protection of the shareholder.

Resolution to Issue Shares

The directors of the company are required to approve the issue of new shares to the private investor. This will be recorded in a Resolution to Issue Shares.

Confidentiality Agreement

Your main business asset may be a unique idea, a formula, a technique, a process, an invention, or a novel business model. Any of these may be the reason why your business will succeed. Protecting this confidential information through a Confidentiality Agreement or Non-disclosure Agreement (NDA) will give you confidence to talk to investors while you reveal some of this highly confidential information.

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Legal Documents you might need as a Business Partnership

There are several legal documents that you might need as a business partnership. With Dragon Law, you can get access to all the documents you need. Creating documents is fast, easy, and affordable.

Partnership Agreement

This is a vital document for a partnership. A Partnership Agreement sets out what is expected from each of the partners, how key decisions are made, and how profits (and liabilities) are divided. This document should cover who the partners are, their rights and responsibilities, who owns what, and what will happen if and when partners decide to leave the partnership or new ones join.

Dissolution of Partnership Deed

Partnerships fail or are dissolved for a variety of reasons. A Dissolution of Partnership Deed helps to properly wind up the partnership and divide any assets or liabilities.

Confidentiality Agreement

When running your business partnership, you may need to share commercially sensitive information. It is important that you preserve confidentiality with a legally binding agreement, especially when intellectual property is at stake. A Confidentiality Agreement, also known as a Non-disclosure Agreement (NDA), allows you to enter into business relationships without having the risk of information being misused or going to third parties without your consent.

Letter of Intent

Before you enter into a formally binding contract, a Letter of Intent (Memorandum of Understanding) can help to set out the key terms of a potential agreement. A Letter of Intent (Memorandum of Understanding) typically includes details of the proposed agreement, pre-conditions, key obligations, the next steps, and the intended signing date. It can be used as a roadmap for further negotiations and to obtain a final agreement more easily. This document is not legally binding, but it can contain certain legally binding clauses such as confidentiality.

Employment Contract

As your business expands, you will need to hire people. An Employment Contract sets out the obligations and expectations of both the partnership and the employee right from the beginning. An Employment Contract should cover key areas such as probation period, pay, benefits, hours, annual leave, and termination. It will help to minimise disputes and ensure a happy working environment.

Sale of Goods Agreement or Supply of Services Agreement

A legal agreement for the sale of goods or supply of services helps to make your customers aware of their rights and obligations from the moment you start doing business with them.

If you are selling goods, you will need a Sale of Goods Agreement. It typically covers the description of what is to be bought, the price, delivery and returns, and how the contract can be terminated.

Use a Supply of Services Agreement if your partnership provides services to another business or individual. This agreement describes scope and nature of the services provided as well as the service levels, the fees to be paid, the timescale, and how to change or terminate the agreement.

Website Terms of Use

If you have a website you should have a Website Terms of Use. This governs the use of your website by others and can help to fulfil some of your legal obligations.

Website Privacy Policy

If your website handles personal data, you should also have a Website Privacy Policy that can make your business compliant with data privacy laws or best practice.

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Incorporate your Business

When starting a new business, one of the first decisions to make is the type of business structure that you will use to operate your business.

The decision is usually whether to set up as a sole trader or business partnership, in which case the legal identity of the business and the individual(s) running it are the same, or a limited company, where the business is a distinct legal entity for liability purposes.

    • If you’re setting up alone, you can choose to start off as a sole trader (otherwise known as a sole proprietor).
    • If you’re going into business with one or more colleagues, then a business partnership is an option. In this case you will need a Partnership Agreement.
    • A limited company is the most common business type. The business is then a separate legal entity that offers protection of personal assets from business risks and liabilities. A Shareholders’ Agreement sets out the rights and obligations of the shareholders. You will need to issue a Share Certificate to each shareholder as evidence of their shareholding in the company. You will need to appoint a director or directors to run the company and a company secretary to deal with company administration.

Carefully consider what type of business entity is right for you and, if you choose to set up as a limited company, where you would like to incorporate your business. Different countries offer different tax schemes, and it’s easier to start a limited company in some countries than in others.

Dragon Law can help. Contact us today to set up your company and jumpstart your business.

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How Private Investments are Structured

There are several ways in which a private investor may choose to invest in your business.

Ordinary Shares

The most common approach is through ordinary shares. You agree to a fixed cash investment from the investor and the number of shares that the investor receives in return. As a holder of ordinary shares, the investor is entitled to dividends and has the right to vote on company matters.

You will need the following legal documents when raising money through ordinary shares:

Term Sheet (Ordinary Shares)

This document is a statement of the proposed terms and conditions in connection with the investment. This document is usually prepared by the investor.

Seed Investment Agreement (Ordinary Shares)

This document sets out how a business will sell ordinary shares to investors and usually incorporates the terms agreed upon in the Term Sheet (Ordinary Shares). The agreement records the parties’ rights and obligations in the shares and the share allotment process.

Share Certificate

A new investor will need a Share Certificate as evidence of his or her shareholding in the company.

Preferred Shares

In a later stage of the business, an investor might want to choose to invest through preferred shares, which grant additional rights to the investor. This is more common in later series financing once the business has a predictable revenue stream. Typically, the invested amount is much larger.

Convertible Note

A convertible note is a short-term loan that converts into equity. Investors loan money to a company, and, rather than receiving their money back with interest, they receive shares in the company’s next round of funding, normally at a discount to the price paid by other investors in that round (typically around 15- 20% less). In short, these are debt instruments backed by the equity of the company.

You will need the following legal documents when raising money through a convertible note:

Convertible Note Term Sheet

This document is similar to a Term Sheet (Ordinary Shares) in setting out the terms and conditions of the investment, but, in this case, it is for an investment through a convertible note detailing how and when the loan will convert into equity.

Convertible Note Subscription Agreement

This document details the terms of the loan provided by the investor, including the provisions for the loan to be converted into equity.

Convertible Note Certificate

A new investor will need a Convertible Note Certificate as evidence of his or her shareholding in the company.

Simple Agreement for Future Equity (SAFE)

A private investor can invest in your company using a SAFE Agreement. It is a relatively new concept and is very similar to a convertible note. Essentially, it is an agreement whereby the investor provides capital to the company, and, in return, the company provides a warrant to issue shares to the investor at a later time and upon a specific event, such as at the next round of funding. In this case, use a SAFE Agreement.

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  • Other Documents you need when Raising Capital

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