Startups have recently been the latest craze among young and enthusiastic entrepreneurs, as they require a minimal investment. If you plan on setting up your own business and being successful at the same time, be careful not to miss out on any legal tricks that, which, if overlooked, can get you into real trouble. The safest way to go is to hire a personal injury lawyer from the very beginning. In the meantime, this is a guide through the top three legal mistakes startups usually make. Do not let it happen to you!
Wrong legal form
You have to choose the right legal form to operate your business in, in order to avoid any serious liabilities or unnecessarily high taxes. The best options to choose from are registering your startup as a corporation or as a limited liability company (LLC). Assuming you do not want to risk bearing any personal liability for the potential loses of your startup, you should definitely opt for an LLC. On the other hand, if you are even considering making your business grow massively in the future or doing any business with investors, then a corporation is the only choice for you. Seldom will any investor put their money into a non-corporate business.
Not signing a founders’ agreement
According to researches, you are bound to be more successful if setting up a new business with someone other than yourself. Be that as it may, it is of vital importance to have a legal document stating who owns what, what each founder’s vesting rights, roles and responsibilities are, what the terms of employment include, how big the salaries are, etc.
You have to think about how to deal with the possibility of failure, to be prepared for the worst case scenario. Cofounder litigations are known to be nasty, so it is the safest option to have a legally binding agreement from the start. You will not be able to take anyone to court if it was never defined what everyone’ role in the company was from the very beginning.
Not hiring the right legal counsel
Setting up your own business can be rather stressful, as well as time and money consuming. The founders are always looking for a way to save money whenever and wherever they can, and this is how they end up hiring an inexperienced legal counsel. It is usually a close friend practicing law or a family member offering free legal advice. This way founders do themselves an ill turn and deprive themselves of an experienced counsel who can anticipate and efficiently deal with many legal problems.
In a nutshell, if you are considering establishing your own startup, it is crucial to be aware of any possible legal oversights that can give you a serious headache. Do not, on any account, be discouraged just because the legal side of the story makes it all seem too complicated. Learn from the mistakes others have made and remember it’s a must to hire an experienced personal injury lawyer!