Starting entrepreneurs tend to focus most of their attention on marketing their products, services, growing their reputation and spreading their brand. In the heat of competition, it is easy to overlook the legal considerations of an operating business. This legal oversight may be what brings your business down. Here are some legal mistakes that starting companies make.
Not hiring an attorney
It’s common for small businesses and partnerships to believe they don’t have the same level of legal obligations as bigger enterprises do. It is a mistake to believe that the legal issues will only appear once you grow in scale. A good idea is to always get a lawyer before you launch and let him/her set you up correctly from the onset.
Not setting up the right business structure
Many legal problems could arise when you fail to identify the correct business structure of your company. There are differences between a sole proprietorship, partnership, and corporations. You should choose the right structure after studying the benefits and disadvantages of each, then you can determine the right one for you. If you set yourself as a sole proprietor, for example, you are legally considered “one “ with your business. If your business happens to be sued, your personal assets are also at risk.
Not having terms and conditions policies to which customers agree to be bound
It is a good practice to have a “Terms and Conditions” agreement for customers to check when employing your services online. This policy should be in writing and published form, otherwise you are left in the open during possible legal suits by an eventual costumer in case of a problem.
Failure to follow business tax laws
You need to know what taxes you are subject to and when the income tax returns should be filed. The tax laws are complicated no matter where the business is located. A good idea is to include a business accountant or have an accounting software that keeps your records and files your taxes.
Inappropriate or incomplete contracts with outside vendors
When entering into an agreement with another company or service, be sure to have legally-binding agreements. For example, when purchasing raw materials from someone outside your business, you need complete contracts. The form of these contracts should be drafted by your attorney instead of free internet websites.
Not getting copyrights, patents, and trademarks
Without protecting your products and your intellectual property, you risk having others steal your name. The laws are different depending on the products, codes, and ideas. You need to know which protection to use depending on your company.
Not getting nondisclosure and non-compete agreements
Everyone who works for you should be bound by a legally-binding nondisclosure agreement to protect your proprietary information. Depending on your company, set up nondisclosure agreements that legally binds your employees never to reveal your secret information. This may extend to client lists and customers, in case of creating a completing business.