Most entrepreneurs look at legal issues as an expensive and burdensome cost of doing business, but with the right guidance you can use the law as a tool to further your goals and position your business for success. You can ensure your entrepreneurial dreams don’t hit any roadblocks by avoiding these five common legal mistakes.
- Picking the wrong (or no) corporate structure
By choosing the corporate structure that best serves your company’s individual needs, you can take advantage of different benefits like minimizing your tax liability and protecting your personal assets from any liabilities incurred by your business. Many entrepreneurs whose businesses are a one man shop skip out on forming a corporate entity all together because it looks like an unnecessary and confusing obstacle, but even solo entrepreneurs have a lot to gain from forming a corporate entity.
- Forgetting the importance of IP
So much goes into building a new company from scratch, and for many entrepreneurs, Intellectual Property (IP) isn’t their top priority. But what entrepreneurs need to remember is that IP isn’t just about protecting your own brand and product, it’s also important to check if someone else has IP protection for similar work. After all, what would happen to your business if one day you found out someone had already trademarked the product or brand you have put so much time into developing.
- Not defining key roles and responsibilities
If you have any business partners it may seem like you’re all on the same page, but if you don’t clearly define the roles each of you has in the company, it’s a recipe for conflict. You and your business partners should have a written partnership and shareholder agreement that makes everyone’s rights and obligations clear.
- Not having an exit strategy
How you and your partners would go about a business breakup probably isn’t the first thing on your mind as you start your company. But all too often business partners grow apart or have different goals as the years go by. Knowing how and when you and your partners can sell your stakes in the business is crucial, and having your attorney prepare a buy-sell agreement that addresses this up front will make for a much easier transition in the event anyone wants to leave the business.
- Tackling legal issues on your own
As an entrepreneur, it may feel natural to take things into your own hands when it comes to your business. Don’t let the seemingly easy DIY legal forms temp you into being your own lawyer. Filling in the blanks on some preprinted forms doesn’t take care of your specific needs and can leave you with a number of problems that could have been avoided had you had the help of an experienced small business attorney.