Startup Legal Issues

Common Startup Legal Mistakes

Believe it or not, legal decisions can make or break a startup small business. Specifically, there are a handful of common startup legal mistakes that can severely handicap your ability to create a sustainable business.

Legal details frequently fall between the cracks in a fast-paced business startup.

Common Startup Legal Mistakes

Yet, whether legal concerns have found their way to your to-do list or not, it's impossible to escape the fact that every startup has legal considerations that must be adequately addressed to create a sound business.

If you aren't convinced, consider this: the legal decisions you make during the startup phase are foundational to your business. The consequences of your early legal mistakes won't go away - instead, they will be amplified with each passing day.

  • Choosing the Wrong Entity or Business Structure. The most common legal mistake new business owners make is choosing the wrong legal structure. Each type of business entity has specific legal benefits and drawbacks, not to mention tax ramifications. If you aren't familiar with the various types of entities (e.g. sole proprietorship, S crop, C crop, LLC, etc.), it's critical to consult an attorney of business consultant ASAP.
  • Failure to Obtain Licenses or Registrations. The licenses and registrations you will need to secure will depend on the type of small business you are starting. Although a failure to obtain proper licensing and registration can be easily remedied, the costs can be high. Delays, fines and possibly even a total shutdown can be the price of a simple oversight.
  • Trademark & Intellectual Property Snafus. Small businesses can encounter legal difficulties in the areas of trademarks and IP protection. Business names, logos and other marks need to be unique, so it's important to conduct a trademark search before settling on your business identity. Also, any proprietary processes you developed while working for someone else cannot be used in your business without the approval of your former employer.
  • Illegal HR Practices. Legal employment involves a lot more than simply hiring legal workers. Proper withholding routines and filing processes, non-discriminatory recruiting and discipline procedures, and other legalities will all affect the manner in which you build and manage your workforce.
  • Inadequate Legal Counsel. Avoid the temptation to go cheap on legal advice. Cash-strapped entrepreneurs often attempt to handle their own legal issues using advice obtained online or pre-fabricated legal forms purchased from online providers. Although attorney fees add extra costs to your startup budget, expert legal counsel is worth every penny if it helps you launch your business on solid legal footing.

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