Legal Mistakes Every Start-Up Should Avoid
Far too many new businesses fail to take legal issues seriously – don’t be one of them. Not being aware of relevant laws and local regulations can put your entire business in jeopardy. Staying ahead of legal issues is not as daunting or expensive as it might sound, and even if you do not want to invest heavily in legal support, at the very least be sure to avoid these pitfalls.
Not keeping legal council: Considering that we live in a notoriously litigious society, it is astonishing that only half of small businesses use legal counsel. The two main reasons for this are that business owners do not believe they need it and that business owners think that hiring a lawyer will be too complex and expensive. Both of these are false. Every small business has legal concerns, and not knowing what they are is not a good reason to avoid hiring a lawyer; in fact, it is probably one of the most important reasons that you should get a lawyer. In this case, what you don’t know can, and probably will, hurt you.
Not taking advantage of technology: Legal services are more accessible than ever. You can get boilerplate contracts written up, consult with a lawyer, and even do remote depositions online and at a fraction of the cost such services used to charge. Many business owners are afraid that the process will be too complex. This is not the case. All of the companies offering these services have spent a lot of time and money streamlining their websites to make sure the process is as easy as possible. Yes, it might take you about an hour of research to get things set up correctly, but that is no reason to fail to take advantage of the cheaper prices.
Not incorporating: Whether you are incorporating or forming an LLC, there are plenty of resources online to get you started quickly and easily. By forming an LLC or incorporating, you are protecting your personal assets from business-related debts. Your business also looks far more credible with an “Inc.” or “LLC” after it. Finally, there are direct financial benefits, such as tax flexibility and expense deductions. These expense deductions especially can be far more advantageous than most people realize. You can depreciate your equipment (which could very well include your car) and you can deduct any business-related expenses from your taxes. These can even include things like dinner with a business friend or the gas you use driving to a meeting. All these things add up, and can save you bundles of money off your tax bill by the end of the year.
Not getting it in writing: It does not matter if you are closing a million-dollar deal or if you are selling a $5 item, you have to get any and all business dealings in writing. A handshake is just not worth what it used to be, so you have to protect your interests by keeping records of agreements. But getting things in writing is just the first step. You have to organize and file away the documents that you keep. It does not matter if you signed a contract if you cannot find it.
Failing to protect your trademarks and copyrights: Imagine a scenario where one of your products takes off and a big player in your industry comes knocking to purchase the rights to your product. This could be a chance to really cash-in! However, if you have not trademarked that product, that big player in your industry can attempt to steal your brand’s name. They will not need to pay you a million dollars to license your brand because they can simply register it for themselves and pull the rug right out from under you. This is why you must protect your intellectual property. Each type of intellectual property is slightly more or less difficult to protect. Patents are the most complex, and you should certainly hire a lawyer to help you navigate the process. Trademarks are a bit simpler than patents, so you might want to consider doing them yourself. Copyright is easiest. So long as you have a dated record showing that you authored something, you will have a strong case. That said, it is never a bad idea to go ahead and secure an express copyright on important intellectual property.
Hire a lawyer, take advantage of technology, incorporate, get everything in writing, and protect your intellectual property – just making sure that you are staying on top of those five issues will go a surprisingly long way towards keeping your business legally well-positioned.