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5 Common Legal Mistakes That Startup Businesses Make

New business owners are likely to make all kinds of mistakes when launching their professional ventures, but some of the most costly could end up being legal snafus. And unless you’re an attorney yourself, it’s probably a good idea to at least get legal advice before you open your doors. Here are just a few common legal mistakes that you may want to take into account when you’re first starting out on your professional path.

  1. Skipping contracts. Business has become so complex and so heavily regulated that you really can’t seal a deal with a smile and a handshake anymore, not even when you’re dealing with family members or lifelong friends. That said, you can’t simply sign on the dotted line, either. You need to practice due diligence when it comes to creating contracts with your lenders, investors, business partners, clients, vendors, and anyone else you conduct business with. This will help to protect all parties involved and it is especially important if you’re trying to preserve personal relationships with business partners in the process. When every detail of your agreement is spelled out in black and white, there should be far less chance of misunderstandings or hard feelings down the line.
  2. Foregoing a legal shield. A sole-proprietorship or general partnership may seem easier than starting an LLC or S-corp, but going this route rests all of the responsibility for your business venture squarely on your shoulders. On the one hand, you won’t necessarily have to take on the up-front costs of legal fees to file for the formation of your business entity, but you could end up paying more for taxes because of your choice and if you are ever the target of legal action your personal assets are on the line. In short, the legal protection of a corporation is probably your best bet.
  3. Neglecting employee documentation. Chances are you don’t have the faintest clue about the many and varied documents that pertain to employees. But you can find yourself in legal hot water if you fail to get your ducks in a row. You are likely aware of tax documents like the W-4 form (for employee withholding) and perhaps the standard NDA (non-disclosure agreement). But you’ll certainly need USCIS I-9 forms that prove your employee are who they claim to be and are eligible for employment, and you may also want to provide documents pertaining to benefits, “at will” employment (if relevant in your state), and even an official employee handbook.
  4. Failure to copyright and trademark. Your business is no doubt built on some kind of original idea, and you’d probably like to keep it that way. But unless you jump through the hoops required to patent, copyright, and trademark your products, processes, and your business overall, you shouldn’t be surprised when someone else steals your idea.
  5. Lack of legal disclaimers. You might not realize the many ways that your products and/or services could land you in a lawsuit. As a result you could be operating without the proper legal text in place to protect the consumer public and yourself from potential accidents or misunderstandings. The legal text associated with your business is important to your ongoing (and uninterrupted) operations, so you might want to think about checking out the Arizona LegalShield marketplace for business plans, or hitting up a highly-recommended local attorney to have standard legal text and disclaimers created for contracts and product packaging, just for example. A qualified lawyer can help to ensure that your legal text protects you.

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