The decision to start your own business is driven by many factors, but a common thread that inspires most startups is the desire to be your own boss. Many entrepreneurs who begin their own startup are spurred by the dream of being unencumbered by someone else’s rules. And going off on your own definitely delivers on that promise with one major exception; you still need to remain in compliance with the law. The freedom that comes with being your own boss also comes with responsibilities, and that includes making sure that you’re not making mistakes that will land you in court. Here are the five most common legal mistakes made by startups, and tips for how to avoid them.
- Not taking the time to explore a corporate structure. You may be glorying in having left the corporate world, but that doesn’t mean that you shouldn’t incorporate yourself. Doing so is most important if you’re working with others and have investors, but even sole practitioners can benefit from considering organizing as a limited liability company or an S-corporation. Different structures offer different advantages, including lowering your taxes and protecting your personal assets.
- Not doing due diligence regarding copyrights, trademarks and intellectual property. You may think that your idea is unique in all the world but if you haven’t done your due diligence (or had an attorney do it for you), your startup may be looking at a lawsuit, or at the least a cease and desist order.
- Failing to create written agreements regarding partnership, shareholders and responsibilities. Your startup dreams may be built on friendship and trust, but far too often things that aren’t put in writing tend to be forgotten or ignored and promises made can be broken. Putting all roles and responsibilities in writing helps protect all involved from misunderstandings down the road.
- Not having an end game. Many startups expend so much energy in their business’ creation that they fail to put an exit strategy in place. You may think that your business will last forever, but that is rarely the case, and by planning for the end and how you want to leave the business at the very beginning, you can make sure that things go smoothly and everybody is treated fairly.
For help with your startup, contact our experienced business attorneys. We can help you avoid these common pitfalls and hit the ground running.