9 Big Legal Mistakes Made By Startups
Because each start-up is unique, identifying possible risks and mitigating them are the main objectives when obtaining legal assistance, regardless of the size or stage of the company.
You want a lawyer who can comprehend the core of your company, its profitability, and what drives it. Your lawyer should ideally be open to coming up with innovative ideas to reduce risk and save your start-up as much money as feasible.
- Not making the deal clear with co-founders
- Not starting the business as a corporation or LLC
Kaizen explains how the process can be less complex in our blog here.
- Not creating an eligible and applicable standard form contract for your business.
- Inadequate employment documentation
- overlooking the need to protect intellectual property
- disregarding significant tax implications
- conceptualizing a name for the business despite its trademark, domain name, or other issues.
- Lacking effective terms of use and privacy policies for your website
- And not having the proper legal counsel
Legal contributes strategically, not tactically, to the growth of your company.
Founders of tech start-ups frequently turn to conventional law firms in the early stages of their business to support their ongoing legal requirements. But once those businesses enter the phase of revenue creation, the demand for legal assistance quickly rises. It is necessary to negotiate contracts with clients and sign partnerships for growth. High-growth businesses cannot afford a one-week turnaround on these important contracts.
Additionally, they can’t afford to have their legal contracts handled in a vacuum by an outside attorney who isn’t interested in “closing the deal” since they don’t comprehend the company’s growth goals or risk tolerance. In this situation, founders of high-growth tech start-ups frequently struggle to identify the ideal service model to meet their expanding regulatory requirements.
And not just about contracts, Startup companies frequently run into issues when they don’t keep proper records of their employees’ employment. Therefore, startups needed to have a core set of employment agreements ready for the majority, if not all, employees to sign. For a new business, a list of initial employment documentation would normally include the following:
- Stock Option documents (if a corporation has been formed)
- Employment offer letters
- Confidential Information and Inventions Assignment Agreement or an NDA.
- Employee Handbook (putting forth firm policy regarding vacation, conflicts of interest, internet usage, etc) (setting forth company policies on vacation, conflicts of interest, internet usage, etc.)