23 Jul 2015 19:38 IST

Hey, how about some work discipline when you start up?

Start-ups prefer to give early employees total freedom in the office. It may be okay when it's just close friends working together but this can quickly get out of hand

Young entrepreneurs don't just want to build a business. They want to offer life-changing experiences, whether it's looking for a cab or need to buy a book. But it doesn't end there. They also want to effect a change within their offices. The aim is to dismantle corporate culture by building a friendlier, more transparent work environment. Admirable as these ambitions are, they can have grave consequences for the company down the road.

Paperless Start-up

Most companies started by young entrepreneurs prefer to work as friends. They work through the day and often spend their free time together. This is an awesome scenario. But these early employees are often hired without any documents in place. There's no appointment letter or offer letter. Perhaps, this makes everyone feel like a shareholder, whether or not they are actually given any equity. These are the good things about an informal environment. But the ugly side – and corporates have much more to lose here, which is why they must be formal – is that it means that an employee of yours could, let's say, do some consulting work for a competitor without you knowing or even start another company in the same line of business as the start-up he’s engaged with on the side while constantly learning from your idea. Now, if you did have an employment agreement, it would likely contain a Non-Disclosure Agreement, which would allow you to do something about this. But since start-ups have little to lose at the start, they often continue without watertight employment agreements for much longer than they should.

Checks? What Checks?

A common trick employed by corporates, particularly in the banking space, is to encourage employees to take a couple of weeks off at a stretch. It's a way of ensuring that things are in order by having one employee oversee another employee's work at least two weeks in the year. These measures may only be needed in large organisations, but start-ups should take a few tips from them early rather than wait to get burned themselves. This usually happens when start-ups, even the tech ones, offer access to every folder there is to anyone and everyone in the company. This opens the door for employees to misuse the data, which will end up creating problems within your team. There's nothing wrong with putting a check on people's access. Even if it is less open, it's your business we're talking about here.

Licensing Agreements

Over the course of the first couple of years, start-ups work informally with a number of designers and coders, who will be defined as consultants or freelancers. Now, let's say that during this time you hadn't registered your company and did not bother to put in place any agreements. The designer that you work with may end up realising that he holds the copyright to your website design and the consultant may know that there's nothing legally holding him back from sharing your secrets with another party.

Start-ups make mistakes because they're chasing growth. But remember that the absence of systems and processes for your employees can cause massive problems, but cost little to put in place. Think about them before they cost you.

*VakilSearch simplifies legal for start-ups by facilitating company registration , trademark filing , documentation and compliance.

To read more from the LegalEase section, click here .