6 Legal Issues Entrepreneurs Must Consider When Starting A New Venture
Entrepreneurs are passionate people who are willing to push their boundaries to achieve their aspirations. Exciting as realizing your dreams sounds, setting up a new venture can be a big challenge. You will need to wear many hats, as there is a lot of work to do, and you cannot expect to hire a big team on your shoestring budget. From procuring finance to securing talent, streamlining operations, and keeping track of expenses (even if it’s as simple as filing taxes as a self-employed individual), the tasks at hand seem endless for entrepreneurs. Legal issues may not be at the top of your mind amid all the work, but overlooking them can land you in deep trouble. The last thing you will want to encounter at the early stages of setup is legal issues. So it makes sense to understand your legal risks and take proactive measures to steer clear of them in the first place. You must also have a viable strategy to address them if they do arise. Here is a list of legal issues you must bear in mind when starting a new venture.
Business structure is perhaps the most critical issue because it is where everything begins. Starting up as a sole proprietor sounds simple, but you can consider a few options in business entities. It is best to register as a Limited Liability Company from a legal perspective because it keeps your personal assets safe from business liabilities. You also need to understand the legal implications of different entities as they affect funding, taxation, and mergers and acquisitions later. For more information, here is a helpful article about the right time to form an LLC and what to consider before taking the leap.
Another issue that requires your attention is the founders’ agreement, which is important if you have co-founders in the venture. You will want everyone on board to have a clear understanding of their rights and responsibilities so that there aren’t any disputes later. The best way to do it is by having a written agreement with the right clauses and proper legal language. The agreement should also include a clause for handling the dissolution of the partnership or exit of the founders if they want to at a later stage.
When you start a new venture, you may hardly imagine the possibility of infringement on your intellectual property. But the problem is more complicated than you think because competing brands may steal your ideas or copy your marketing material wrongfully. Protecting your intellectual property with copyrights, trademarks, and patents is a worthy initiative because it dissuades others from infringing your ideas and strategies. It makes you stress-free and strengthens your case if issues arise.
Personal injury lawsuits
A legal issue that entrepreneurs tend to overlook at the startup stage is personal injury claims. But they can be a major threat to your business because they can cripple it financially and damage its reputation. Victims who get injured in accidents involving company vehicles will hire highly experienced car accident attorneys to sue your company for massive claim values. Premises injuries and defective product claims are other common types of personal injury lawsuits that businesses may face. Ideally, you should prevent such mishaps in the first place. It is equally vital to have a strategy to deal with lawsuits.
Startups begin with small teams, and it is easy to overlook the value of legal contracts with employees at this stage. But this issue deserves attention to keep things going smoothly with your team. Having clear contracts that mention everything, from compensation to benefits, leaves, payment in lieu of notice, and termination, prevents disputes and keeps your people happy. Also, it keeps your startup safe on the compliance front. Consulting a lawyer to draw up these contracts is a good idea because they will ensure proper language and the inclusion of requisite clauses.
Entrepreneurs beginning their first startup often fail to think a lot about NDAs because of a lack of experience. However, your business is at risk when you have employees and independent contractors handling crucial information and details about the clients. You may trust them enough, but it always makes sense to have them sign a non-disclosure agreement at this stage. You cannot risk losing your reputation or the trust of your clients only because of dishonest employees.
Paying attention to critical legal issues can save your startup from big trouble in the long run. While these matters sound complicated, having an expert lawyer to guide you sets you on the right track. They will have the right advice to help you stay out of problems and deal with them if they still arise at any point. A little effort and expense on staying safe are worthwhile.