As a startup founder, it is easy to ignore small details and focus only on the big picture when you are too enthusiastic about setting up. There are good chances of overlooking proper legal standards and fixes amid the rush to get your product or service to market.
The situation can be far more serious than it sounds, as legal issues can open up your new business to disputes and litigation. In fact, it is one of the largest entrepreneurial challenges that founders across the US talk about.
So founders need to make sure that they stay on the right side of the law to prevent such issues from arising in the first place. As an entrepreneur, you will have to make several legal decisions as you establish your venture, and throughout its lifespan.
While knowing the business laws in the country and your state is vital, having a proper strategy to guide your decisions is worthwhile. Here are the measures that you must implement for legal coverage at the startup stage.
1. Start with a founder prenup
Most founders collaborate with one or more co-founders while setting up their businesses. It is important to have a founder prenup in place to ensure that there are no disputes down the line.
It is an agreement that defines terms such as ownership, stock, and shares of co-founders. Further, it should also include clauses that define the terms of an exit of an individual from the venture.
Even founding teams that are on the best terms at the initial phase may end up wanting to terminate the contract. A written agreement prevents complications and makes things smooth if such a situation arises.
There are good chances that you will be able to close things on amicable terms without dragging the dispute in the court.
2. Make the right choice while incorporating
Every business has different legal requirements it needs to comply with, depending on size, scale, and domain.
There could also be some state-specific requirements for US-based businesses. It is vital to be aware of these regulations and ensure compliance with them.
Making the right choice while incorporating is equally vital as the choice of the business structure affects founder liability and tax matters.
The choice between sole proprietorship, LLC, and the corporation is confusing, so it is best to seek guidance from an expert business lawyer. The right choice at the setup stage can keep you on the safe side legally and also cut the hassle of restructuring at a later stage.
3. Brand carefully
Once you establish your business, you will want to build it into a brand. You may love a brand name, but make sure that it doesn’t already exist because replicating an existing brand can land you in deep legal trouble.
Pay attention to marketing material such as brand logo and messaging as well, because you would not want to be incriminated for copyright infringement.
While you must steer clear of copying brand name and identity for your business, also make sure that it is attractive enough to impress and entice potential customers.
4. Safeguard your intellectual property
While you should be careful about not infringing the branding assets of the competitors, safeguarding your own intellectual property is equally vital.
Intellectual property includes original ideas, products, or services that your business sells. You need to validate and secure your intellectual property ownership by implementing legal procedures to get patents, copyrights, and trademarks for them.
If you work with software products, making employees and contractors sign non-disclosure agreements is a protective strategy you can rely on. Having everything legally on paper keeps your intellectual property safe and strengthens your legal stand if disputes arise at any time.
5. Fortify your startup against injury lawsuits
A matter that founders seldom pay attention to is injury lawsuits, but these can be expensive and complicated. Injury lawsuits can come in different forms- due to premises accidents, defective products, accidents involving business vehicles, and more.
There are specific norms that apply to businesses according to their location, which means that you need to understand your state’s law. If you operate in Tennessee, it is best to seek advice from a leading injury attorney near Lebanon TN for a legal plan against these lawsuits.
Preventing accidents and safeguarding customers and employees should be the top priority for businesses, more so if you are just starting. If accidents occur and people get injured due to negligence of the business or employees, you may have to shell out hefty compensation to save your reputation.
6. Comply with employment laws
Another measure that startups must implement to be on the right side of the law is complying with the US employment laws that apply to your business.
While you must follow the wage and time norms specific to your company size and industry, it is also important to steer clear of practices like workplace harassment and discrimination.
Take a good look at your human resource policies and ensure compliance for them as well. Compliance with employment laws not only keeps your business legally sound but also enhances your reputation as an employer and gets you the best talent in the industry.
7. Hire the right attorney for each task
With a startup budget, it is easy to skimp on the cost of legal services, but that is the last thing you should do. Not paying attention to legal protection can cost a lot in the long run, so hiring experts can be the wisest decision.
When you onboard an attorney to handle a specific task, get a specialist because specialization makes a difference. If you want to patent your product, only a patent and trademark specialist can help you do everything right.
Similarly, a tax lawyer is the best professional to handle your matters with the IRS. You can opt for a startup lawyer to cover most of the legal tasks associated with founder agreements, client contracts, and employee NDAs.
Being on the right side of the law can make life much easier for the startup founders as you can focus fully on growth initiatives rather than be stressed about court dates, litigation fees, and settlements.
A proactive approach keeps your business safe, and it is best done with the help of professional counsel right from the start. Hiring a lawyer can exert some pressure on your budget, but the services are worthwhile because they safeguard your venture in the long run.
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