7 Ways to Avoid Legal Mistakes Commonly Made by Entrepreneurs

Even if you have an amazing and brilliant business idea, and even if you have strong financial support, a small legal mistake can quickly and permanently drown out your entrepreneurial ambitions and dreams. As all entrepreneurs have learned, many times the hard way, the devil is in the details and starting and building a business is full of small but complex legal details.

Everyday work has a wide range of business disputes and business litigation. In many cases, costly, complex and brand-damaging lawsuits could easily have been avoided if only founders and CEOs had to make smart legal choices early in their business development, work thoroughly with their legal documents and get through. Great legal advice.

If you want to avoid the most common legal mistakes made by entrepreneurs, you need to start here:

Choose the right kind of entity.

Each type of business entity, from LLC to C Corporation to S Corporation, has its own set of rules and benefits. Making the wrong choice can lead to personal liability or getting stuck writing huge tax checks. Choosing the right entity can protect you as an individual and help you grow your business.

Study all regulations and restrictions.

It is important to understand whether your business, your products or your services are subject to local, state or federal regulations. Will your business be affected by city zoning laws? Does a government agency oversee your industry? Do you need any special permission or license for your business activities? You may be surprised at how many start-ups simply fail to know and follow the rules.

Be thorough when drafting the contract.

It may be tempting to download form contracts from the Internet or to exclude contracts that others have handed over to you when starting your business. Both of these are huge mistakes. If your contracts with customers, vendors and employees are not carefully written and thoroughly scrutinized, it can lead to costly and even business-murder cases down the road.

Treat your employees fairly In accordance with the law.

Conflicts with employees inevitably occur with some staff members in almost every business. You must be prepared for these conflicts through clear employee policies, fair employee benefits and protection against employee inequality and injury. Also, consider drafting non-disclosure and non-competitive documents for employees to sign. Lastly, do not be afraid to tell the real reason when firing employees.

Understand securities law.

Federal and state securities laws are complex and fines can be extremely strict. Before you start issuing stock to family, friends and angel investors, you need to be very familiar with all the rules and regulations regarding securities. For example, you cannot sell shares of your company’s common stock without proper disclosure documents, and you cannot issue securities to someone who is not a recognized investor.

Protect your intellectual property.

Have you ever trademarked the logo you’ve spent so long on developing? Or confirm that employee discoveries made in the workplace belong to your company? Or preserve your unique formulas, recipes, and process? Protecting intellectual property is extremely important, especially if you have products that are unique or if you are in the business of inventing or creating new ones.

Hire the right lawyer.

All of the above issues can be completely avoided if you find and hire the right attorney at the beginning of your journey to create a successful start-up. An attorney with a broad background in business law is a must. Choose an attorney who understands your needs and knows how to close before starting a business dispute.

There are numerous challenges and barriers to starting a successful business, including a large number of legal errors and omissions. Fortunately, with a little help from an experienced business attorney, some planning, a few well-prepared documents and a lot of hard-working knowledge, these mistakes can be avoided.

Kurt Smith is a 27-year-old entrepreneur and author who loves to contribute to various business and law blogs. Without writing, Kurt likes to travel around the world to learn new cultures and experiences.

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