Starting a business involves making a lot of decisions—and each choice can have long term consequences. There’s a lot to learn as a startup founder, so there’s no time like the present to start considering the legal side of owning a business. These legal tips for entrepreneurs aren’t a substitute for one-on-one advice. But they do provide some food for thought.
Protect Intellectual Property
For companies bringing an innovation to the marketplace, intellectual property (IP) may be the single most valuable piece of their business. IP doesn’t just apply to physical inventions. It can also include ideas and designs—or even trade secrets about how a business is run. Intellectual property can be protected through patents and other legal instruments. It’s even possible to file for protection on potential future improvements on an existing design. Don’t confuse patents (which protect inventions) with trademarks (which help protect a brand).
Shield Business and Personal Assets
More than one new business has been destroyed by a single costly mistake or accident. Ways to reduce risk include:
- Creating a limited liability company (LLC) to protect personal assets in the event of a claim for damages
- Obtaining all applicable licenses and certifications as required by law
- Performing a safety/risk assessment to ensure that the workplace, business operations, and technology infrastructure are compliant with best practices
- Purchasing adequate insurance coverage for the nature of the business including general liability, workers’ compensation, and other policies
Document Everything Thoroughly
Good recordkeeping helps new businesses maintain compliance—and prove that they are doing so in the case of an audit. When going into business with one or more partners, a properly-designed partnership agreement is essential. This is perhaps even more important when business partners are family members. Don’t rely on oral agreements or assumptions. Use clearly written contracts and/or policies for each aspect of your business, including relationships with partners, vendors, customers, and investors.
Budget Adequately for Legal Services
There is no substitute for professional legal counsel when it comes to setting up a new business. Although there are templates and forms available for “DIY”, the instructions and choices are often confusing—and guessing how to get things right is a stressful and error-prone process. A small business attorney can provide answers and insight into what needs to be done first and what can wait until later. Working with an attorney who offers a flat fee structure for startups can save money while still providing the basics. When legal services are part of the budget instead of an unexpected expense, business owners tend to talk to their attorneys more often and avoid expensive mistakes.
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