Startup Legal Mistakes to Watch out for

Having a startup business is fun! At least that’s what most people think. Although startups can be a lot of fun, it’s also a lot of hard work and requires a lot of time and dedication from those who are trying to make the startup happen. With so many business decisions to make, it’s almost natural to try and move quickly throughout some of the decision-making process. But (and trust us here) you do not want to cut corners or make hasty decisions in the legal department of your startup.

We want your startup to be successful, and obviously you do too. That’s why we’re informing you of some of the legal mistakes that are commonly made by startups so you can steer clear of making them yourself.

These are the no-no’s we want to help you avoid:

1. Being in a Grey Area With Your Co-Founder(s)

You know this person or these people well enough to go into business together. They may or may not be your best friend in the entire world, but you’re going to be making many decisions together, so it’s time to get comfortable and talk. Talk money. Talk responsibilities. Talk about who will be making the financial decisions, the marketing decisions, heck, even who’s making the decisions about what the wall color in your office will be. Talk until you’ve come to an agreement on all topics of your startup, and then put what you’ve talked about into writing in the form of a legal agreement (hint: we can help you with this!)

2. Choosing The Wrong Type of Entity

Do you know if your startup is a Partnership, Sole Proprietorship, Limited Liability Company (LLC), or a Corporation? Each of these entities is different, and choosing the right one for your startup is important.

  • Partnership — As soon as two or more people start a for-profit business, they are technically in a Partnership.
  • Sole Proprietorship — Just think that sole=one, so businesses that are run by a single person are usually considered to be Sole Proprietorships.
  • LLC — This type of entity provides business owners with many of the same protections big businesses get, only LLCs allow for more flexibility when it comes to actually running the business.
  • Corporation — This type of entity is generally used with very large companies.

3. Not Protecting Your Intellectual Property

We know you’ve got some great ideas, otherwise your startup wouldn’t be starting. But did you realize that your ideas could be considered as intellectual property, and thus be protected from anyone claiming your ideas as their own? This goes for business logo ideas, manuscript developments, or any other creative design that’s personal to you and your business. We at Jurado & Farshchian, P.L. can assist you in protecting your intellectual property by helping you apply for a copyright, patent, or trademark.

4. Failing to Comply with the Securities Law

Basically, you need to make sure anyone who’s investing money in your business has accurate and up-to-date information about your company and the risks they’re taking on by investing in it. This matter can be a bit tricky, so we recommend coming to us for advice!

5. Forgetting to Create a Vesting Schedule

When it comes to the equity of your company, chances are you’re splitting it with your co-founders in some way. By creating a vesting schedule, you’re ensuring the co-founders will earn their shares over time.

6. Declining to Work With A Business Lawyer

We’re not just saying this because we ourselves are lawyers — we’re saying this because it’s the truth! Not working with a lawyer when your startup is in its infancy could leave you facing major problems in the future. Whether you have 5 questions or 500 questions, we’re here to help you so that your startup is a success!

7. Not Establishing Agreements With A Clear Template

If there should ever be a discrepancy that arises with an employee or contractor, you want to be able to look back in your files and find an agreement that was agreed upon and signed by the both of you. This will ensure that any issues are handled quickly and efficiently, and that everyone has a clear understanding of what’s going on. If you don’t have use a solid template to document your agreement, you may find yourself trudging through some muddy water.

We know how much it takes to turn a startup into a thriving business, and at Jurado & Farshchian, P.L., we want to lend you our knowledge and skills to help get your business started on the right foot and make sure you avoid these common mistakes. Contact us via email at romy@jflawfirm.com or call us at (305) 921–0440 to find out more information!

Read more at 7 Common Legal Mistakes You Don’t Want To Make As a Startup