Beginning a new business can be a really overwhelming job because one needs to take care of even the smallest issue. That is why; it is quite natural for them to commit mistakes. Here are the most common legal mistakes a startup makes on their journey towards success-
- Lack of Proper Counsel:
It is the commonest mistake a startup company makes on legal terms. Whether it is for saving money or out of sheer ignorance, they tend to avoid taking any legal advice from anyone. Due to the lack of legal counsel it becomes problematic for the small companies to recognise and differentiate between good and bad opportunities.
This mistake is something one must avoid if they want their business to run smoothly and to stay a step ahead of their competitors.
- Lack of security for Intellectual Property:
Most of the startup companies are found to be ignorant about protecting their creations or the intellectual properties. There are typically four different kinds of such properties-
- Copyrights- applicable for protecting the written works
- Patents- applicable for products made out of the company using the resources of the company
- Trade secrets- applicable for the secret knowledge related to the business
- Trademarks- applicable for protecting the boundary line that makes a difference between two products of similar type
Ignorance about the protection related to this intellectual wealth might lead a startup company towards destruction. For instance, another company might claim all those rights and get the benefits for your hard work.
- Inability to incorporate properly:
The structure of business where there is no border line between the company and the owner is essentially faulty. This happens mainly in cases of sole proprietorships. That is why; it is extremely important for a startup company to incorporate with others to give the company its own identity.
While choosing a business entity, startup companies generally make mistakes about choosing the right option. In order to avoid these mistakes one must take proper legal advises.
- Carelessness about making written agreements:
No matter how silly does this sound, most of the startup companies tend to avoid making proper written agreements. This mistake might be really costly with just a little help of bad luck. The main reason for this ignorance is generally the assumption about the complexities regarding a written agreement. This is practically stupid because making a business agreement is not a big deal. Anyone can make such an agreement with a little help from the legal sites on the internet.
Making an agreement helps to understand the expectations of everyone. Not only that, one might take legal actions, if required, based on the agreement.
- Lack of knowledge for implementing employment laws:
Be it for employing a full time employee or hiring a contractor- it is absolutely essential to make an employment agreement. Without this, the employees might make future objections about the work hours and other requirements related to the work.
These are the commonest mistakes a startup company makes and it is absolutely essential to avoid them for growth and security.