Setting up a new business is an exciting experience which usually ensures long-term success. However, not every business reaches becomes successful. The business world is full of complexities- finances, liability, trademarks, etc. there is a reason why most of the entrepreneurs get caught up when it comes to legal matters in the middle of launching their business. They forget to address the legal issues that may come in the way of their business.
Today, I am going to share few common yet very important legal issues every entrepreneur must address at the beginning of their venture:
1. Believing that a Legal Matter can be Solved Later:
When you have a mindset which says, “I will consult a lawyer once I raise some money” will take you nowhere. This shortsightedness negatively affects your business. There are various matters in the business that must be addressed in the beginning as they cannot be solved in the later stages. It also does not mean that you should invest all your money in legal matters.
In the beginning, a competent lawyer can be hired for a comparatively small amount at early stages. A good and competent legal expert will save your cost while giving you excellent solutions. So it is best to hire a lawyer and sort out legal matters at the beginning of your startup rather than waiting for the right time in the later stages.
2. Your Business is not Compliant:
Regardless of the industry type, corporate compliance highly affects the businesses. For a startup, given their first experience of running a business, often don’t ensure whether their business is compliant with the laws or not. For startups, it is very important to know what type of documents and records to be maintained. The business laws that apply to your business depend upon the type of your business as well as your country’s laws. For this purpose, it is important that a startup must have a business attorney who can assure that whether a certain business is compliant with the laws or not.
3. The Business Structure:
Defining a structure is very crucial for any business. Selecting the right business structure reflects the success or failure of a business. There are various factors to be considered such as the type of business, costs associated with the particular business, tax implications or your future plans. For example, whether you want it to be public in the future or want it to remain a private entity.
The most common business structure include partnership, sole proprietorship, S-corporation or C-corporation. So, it depends upon your business that which structure would suit it the best.
4. Go for Written Agreements:
Without written agreement at hand, complications may arise. In order to avoid this scenario, it is very essential to write down the rights and duties of every party regarding running the business in the form of an agreement. In a typical sense, such arrangements refer to buy-sell agreements, shareholder agreements, partnership agreements, and employment agreements.
In addition to this, the parties must be bound through non-disclosure agreement that the signing parties cannot share sensitive information to the competitors; this applies to both employees and the partner that exits the business contract.
5. Protection of Personal Assets:
A business owner should not mix up personal assets with personal ones- personal assets must be protected. For this purpose, a business owner must keep a separate bank account for the business transactions. This is because just in case when a creditor sues your business, they can seize business account only and the event must not affect your personal funds.
Also Read: Barriers to Starting Your Own Business & How to Tackle Them
6. Make Sure Your Intellectual Property Rights are Protected:
As the product or any other new concept you have introduced in the market is your property, make sure you have protected it through intellectual property rights. It includes trademarks, patents, and copyrights.
These rights provide a business with exclusive rights to use their original work and prevent others from copying and selling their material. Although, the work once created is protected however, by registering the work gives the owner legal resources and right to sue the other party.
7. Compliance with the Employment Law:
A business owner must ensure that the policies in the business are in compliance with the labor law. Moreover, they must not overburden any employee with the work that exceeds the allowed working hours per week.
8. Protect Your Business Name:
Before using a certain name, it is important to do a trademark search to make sure there is no other business running with the same name. A lawyer can assist in registering the business name as well as the logo making sure you are protected and no breach of trademark laws occurred.
9. Consider Vesting:
It is very difficult to find the right business partner whose chemistry matches yours and you both have similar work ethics. In this case, when you have to make important decisions for your company, you should consider vesting shares instead of getting them at once.
10. Know What to do If the Business Gets Sued:
There is a possibility that your business gets sued. In this case, the best way to deal is to settle the matter before it goes to the court. For this purpose, a business lawyer must use his or her negotiating skills, and work hard towards settling the matter and save your company from going to court and possibly losing the case. And if this effort fails, consult the attorney for strategies to win the case.
11. Don’t Hire an In-experienced Lawyer:
Amongst business community, there is a famous saying that ‘rate the judgment of an entrepreneur by their selection of the lawyer.’ Attorneys with little to no experience working with the entrepreneurs or capitalists will serve in the wrong direction. Moreover, they will not be able to recognize the tricks another party may employ in the case at hand; and there are bigger chances of you losing the case. Hiring an experienced lawyer who knows the complication of the case and strategies, ensures success in legal matters.
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