Smart entrepreneurs learn from their mistakes, while smarter entrepreneurs learn from the mistakes of others.
Managing start-ups can at times be an overwhelming experience, but can be done right if certain crucial mistakes are avoided. Although some legal slipups are easily fixed, others will cause big problems to your business in the long run. Here are a few common legal mistakes entrepreneurs make that have serious long term consequences.
Not having a shareholders agreement with co-founders
Think of this as a pre-nuptial agreement between the co-founders. When you launch your start-up, you all have the same goal and the same vision for your company. As your business grows and expands however, interests may change, and if the deal is not clear between you, this can result in legal troubles. Just think of the Zuckerberg/Winklevoss scandal back in 2004.
The deal between co-owners must be made clear from the very beginning to avoid legal troubles in the futures. Establish issues such as:
– What percentage of the company does each person have?
– How will you decide the sale of your business?
– What is the goal of the business?
These are just a few questions to be asked. Make sure your agreement is exhaustive and will protect you from any possible conflict between co-founders.
Disregarding Trademark and Copyright
Once your company innovates a new product, a new idea, or a new technology, this innovation has to be protected. Many intellectual property protective measures can be used by start-ups such as patents, copyrights, trademarks, trade secrets, etc. Inform yourself on which protective measure is appropriate for your business.
It is also important to note that this concept goes both ways. As much as you need to protect your intellectual property, make sure you don’t infringe other companies’ trademarks and copyrights. For example, make sure you do ample research before deciding on your company name or your domain name. You can use tools such as GoDaddy to avoid legal issues of the sort.
Not Lawyering Up
Saving money by cutting back on expenses is definitely a good thing for your start-up. However, you should not hire an inexperienced lawyer or a friend to guide your start up: while you may save money at first, the legal troubles caused by an inexperienced lawyer will definitely catch up to you in the long run.
These are just a few important legal tips to think about when starting your business. Legal mistakes are often made by start-ups, but it is crucial to avoid legal problems that you won’t be able to fix down the line.Email This Post