When you’re ready to raise money from professional investors, your simple local company structure needs to evolve. Here’s what you need to know about legal requirements without getting lost in unnecessary complexity.

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The Dual Structure Reality

Why you’ll probably need a holding company: Most international investors prefer to invest in entities incorporated in familiar jurisdictions (Delaware, Singapore, Cayman Islands) with predictable legal frameworks. When to set this up: After you have investor interest but before you finalize terms. Don’t set up international structures speculatively—wait until you know you’ll need them. How it works: Your local operating company becomes a subsidiary of an international holding company. Investors buy shares in the holding company, which owns your actual business. Cost and timeline: Expect to spend $5,000-15,000 and 4-8 weeks setting up dual structures with proper legal counsel. Budget accordingly.
The Investor Preference Hierarchy
  1. Delaware corporations (preferred by US VCs)
  2. Singapore corporations (preferred by Asian investors)
  3. Cayman Islands (preferred by some international funds)
  4. Local MENA jurisdictions (accepted by regional investors)
  5. Other jurisdictions (usually requires investor approval)
Articles of incorporation and bylaws: These need to accommodate multiple share classes, option pools, and investor rights that didn’t matter when you were a simple operating company. Shareholder agreement: Governs relationships between founders, employees, and investors. Includes vesting schedules, transfer restrictions, and decision-making processes. Stock option plan: If you plan to give equity to employees, you need formal documentation of how options work, vesting schedules, and exercise procedures. Investment agreement: The actual document that governs your fundraising round. This defines investor rights, board composition, and various protective provisions. Look for venture capital experience: You need lawyers who’ve done multiple startup financings, not lawyers who handle general corporate work. Ask specifically about their venture client portfolio. Regional and international coordination: Find firms that can handle both your local entity requirements and international holding company setup. This usually means international firms with local offices. Fixed fee structures: For standard fundraising documents, good startup lawyers offer package pricing. Avoid lawyers who insist on hourly billing for routine venture transactions. References from other founders: The best way to find good lawyers is recommendations from founders who’ve recently raised similar rounds in your jurisdiction.

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What Investors Actually Care About

Clean cap table: Clear ownership records with no disputes about who owns what percentage. Messy founder equity situations kill deals quickly. Proper IP assignment: All intellectual property should be cleanly assigned to the company. This includes work done by founders, employees, and contractors. Employment agreements for key people: Founders and key employees should have formal agreements that include IP assignment and appropriate restrictive covenants. Basic corporate governance: Regular board meetings, proper documentation of major decisions, and compliance with local corporate law requirements. Waiting too long to get legal help: Don’t try to negotiate investment terms without experienced legal counsel. Investors have lawyers; you should too. Trying to save money with generic documents: Standard legal templates rarely work for venture financings. Each deal has specific terms that require customized documentation. Not understanding investor rights: Many founder-friendly terms can become problematic in future rounds. Understand the long-term implications of what you’re agreeing to. Incomplete IP cleanup: Discovering IP ownership issues during due diligence can delay or kill deals. Clean up IP assignment before you start fundraising.
The Due Diligence Test Before starting fundraising, ask yourself: “If an investor’s lawyer asked to see all our legal documents tomorrow, would we be embarrassed by anything?” If yes, fix it first.

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Regulatory Considerations by Sector

Fintech: Banking partnerships, payment processing licenses, and compliance with financial regulations. Some investors won’t invest without regulatory clarity. Healthcare: Medical device regulations, patient data privacy requirements, and professional licensing issues. Plan for longer regulatory timelines. Education: Data privacy requirements for student information, content licensing, and sometimes educational service licensing. E-commerce: Consumer protection compliance, cross-border commerce regulations, and tax collection requirements in multiple jurisdictions.

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International Fundraising Specifics

Tax treaty optimization: Your holding company jurisdiction should have favorable tax treaties with countries where you operate and where your investors are based. Currency and exchange controls: Some MENA countries have restrictions on foreign currency transactions or capital movements that affect how you structure investments. Investor verification requirements: Know-your-customer and anti-money laundering requirements vary by jurisdiction and can affect investor onboarding timelines. Ongoing compliance obligations: International structures create ongoing filing requirements, tax obligations, and governance requirements that add operational overhead.

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When to DIY vs. Hire Professionals

Always hire lawyers for: Investment agreements, complex corporate structures, IP assignments, and anything involving regulatory compliance. You might handle yourself: Basic employment agreements using standard templates, simple NDAs, and routine corporate housekeeping if you understand the legal implications. Gray areas that require judgment: Terms of service, privacy policies, and basic commercial agreements can sometimes be handled with templates, but consider legal review for important relationships. Incorporation and basic setup: 1,000−3,000forsimplestructures,1,000-3,000 for simple structures, 5,000-15,000 for international holding companies. First fundraising round: $10,000-25,000 in legal fees depending on deal complexity and amount raised. Ongoing legal maintenance: $2,000-5,000 annually for basic corporate housekeeping and routine legal needs. Emergency legal issues: Keep a reserve budget for unexpected legal problems that require immediate attention. The goal isn’t to minimize legal costs—it’s to spend money on legal help that actually protects your business and enables growth. Good legal structure is expensive upfront but prevents much more expensive problems later.