5 Big Legal Mistakes Made By Startups

Each entrepreneur that launches a startup is obsessed with the idea of having great success. It is absolutely normal to feel an excitement and stay true to your vision of success. However, entrepreneurs usually get so much carried away with their ideas of success that in their initial euphoria of big success they leave out some of the important stuff, like following legal regulations. Overlooking the importance of legal regulations early on in the life of your startup can hold your success off significantly. Here are 5 legal mistakes to be avoided to establish a solid legal foundation for your startup:

Failing to choose the right type of entity

Choosing the right type of entity is one of the first and most crucial decisions that an entrepreneur makes. There are a number of different entity types (i.e. sole proprietorship, partnership, LLC, C-Corp, S-Corp, B-Corp), each one coming with its own tax advantages and restrictions. Before selecting one of the mentioned entity types, be aware of what each entity type demands from you and which is the most suitable one for your startup. For example, if you decide to form an LLC, your personal assets will be protected if your startup goes bankrupt or gets sued. Thus, the only money you are at risk of losing is the amount you initially put into the company. Otherwise, choosing C-Corp type will provide your startup’s massive growth and venture capitalist investment.  So, you will certainly need to consult an experienced business lawyer to fully understand the pros and cons of each entity type and choose the best fit for your startup.

Ignoring the need to protect your intellectual property

Intellectual property protection is one of the key considerations to make in order to avoid further legal snugs. Your ideas, products, company name and logo are all under the protection of intellectual property law. Without intellectual property protections, any other company can steal your ideas, products, etc. and you can not take any legal step to tackle the problem. Thus, getting intellectual property protection will act as a defense mechanism against infringement claims from other companies. The main forms of intellectual property to consider are patents, trademarks, copyrights and invention assignments. A skillful intellectual property lawyer will take all the precautions to register and protect your intellectual property from infringement.

Underestimating the importance of a standard contract form

Beginning a startup requires a lot of hard work and large amounts of time and money investments. To prevent your startup from collapse, take measures to protect your business legally from the very beginning of your business. A standard contract form is one of the most efficient ways of dealing with customers or clients in the legal framework. Underestimating the importance of a standard contract can give rise to many big legal issues. Thus, apply to an experienced business lawyer for drafting the contract to make it favorable for your startup and fair to your clients. An ideal standard contract form should be not too long, easy to understand and clearly formulated.

Lack of proper employment documentation (NDA)

Failing to comply with legal requirements in forming proper employment documentation is a significant legal mistake that can have fatal consequences. Therefore, startups should have a core group of employment documentation to be signed by employees. The typical employment documents that regulate employer-employee relationships include stock option documents, employee handbook, non-disclosure agreement and some more. For instance, a non-disclosure agreement (NDA) will ensure that all the confidential information you share with your employees stays private.

Consulting a business lawyer

There are many legal errors that new businesses deal with at the beginning, yet delaying to consult a business lawyer can cost you later. There can be a variety of situations that require some legal knowledge such as signing contracts, dealing with tax issues and so on. Having an experienced business lawyer by your side will encourage you to make more confident and accurate legal decisions. A good business lawyer will save you from the stress of taking care of your legal requirements and will ensure your rights are highly preserved as a startup.

The highly professional and competent business lawyers at the Margarian law firm will help you start your business in a smart way and avoid making legal mistakes. They pride themselves on their immaculate attention to details and hard work towards the best results. The experienced business lawyers at the Margarian Law firm are there to boost the prosperity and development of your startup ensuring that all the legal requirements are observed.

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