If you’re planning on starting a business or already in the early stages, congratulations! Building a business is a challenging but fulfilling endeavor, and I consider myself fortunate to spend a great deal of time counseling and advising business owners and entrepreneurs like yourself.
Today I’d like to identify several common legal mistakes which many businesses make in their infancy stages. Avoid these mistakes and you’ll sidestep a wide variety of legal headaches (and expenses) down the road.
1. Failing to properly organize the business. Limited liability company? General partnership? Professional limited liability corporation? There are a variety of options to choose from, and they all have varying taxation and operating implications. While it’s important that you organize your business in a manner that provides proper liability protection – there are a variety of additional factors that must be considered. Don’t make this decision without the guidance of an experienced business attorney.
2. Omitting non-competition agreements, non-disclosure agreements, and other intellectual property protection. Absent a specific written agreement, the creator of a “work” owns its rights. All employees must sign work-for-hire and assignment of rights agreements so that the company’s ideas and work product stay with the company. Depending on the product, trademarks or patents may also be appropriate to protect the company’s intellectual property. For some businesses, this type of intellectual property protection isn’t necessary. For others, it’s absolutely critical. Get in touch with us today to discuss your specific circumstances!
3. Skipping the detailed company, operating or partnership agreement. Many businesses start so quickly and with such great anticipation, that the founding members (or partners) figure they’ll iron out the details at a later date. Skipping this step damages the founders and the company. Your operating agreement delineates roles within the company, members’ rights and responsibilities, and ownership interests. How will decisions be made and whom has the authority to create company obligations? Can any member force dissolution? If you want to protect your interests, it is critical that these questions, amongst others, be addressed from day one.
Starting a business is challenging, but also incredibly rewarding. In order to give your business the best chance for sustained success, avoid these (and other) crippling mistakes. If you’d like to learn more, or if you’d like specific advice regarding your business, please contact the Trembly Law Firm today.