Attorneys know a thing or two about how businesses can stay compliant with the law. Unfortunately, many entrepreneurs do not. And that means that legal professionals see the same issues cropping up time and time again. Fresh entrepreneurs who don’t stay on top of the law risk being shut down for good. And, many make rookie mistakes that permanently undermine their business. So what legal blunders are startups making, and what can they do about them?
Failing To Affirmatively Protect Your IP
Intellectual property laws in the US have shifted somewhat since the early days. It used to be the case that patents were granted on a first-to-invent basis. But now they’re granted on a first-to-file basis. Thus, the game has changed dramatically. Now even the people who didn’t actually create the invention can potentially benefit from it. Given how many young startups rely on their IP, this is a significant risk. So what’s the professional advice? File as early as you can, as often as you can, to avoid having your ideas pinched and your business suffer. Also, remember to get stakeholders in your organization to sign Non-Disclosure Agreements. This goes some way to protect your ideas from being spread more widely.
Failing To Comply With Health And Safety
Health & safety at work is a priority of today’s legislators and should be right up there on your priority list too. Most businesses believe that they are doing all they can to address health and safety in their workplaces. But the statistics tell a very different story. Every year, hundreds of businesses face fines related to health and safety that undermine their operations. And these fines are substantial. According to one consultancy, they range from $5,000 to over $3 million. So what should startups do? The best solution is to get a professional to inspect the business and highlight any problem areas.
Starting A Company With The Wrong People
Starting a business with the right people is a surefire way to succeed. But starting a business with people who aren’t determined or who are flaky can lead to disaster. Remember, startups are risky and fragile things. At the start, you may think that you’re never going to make it through. Technology companies, especially, face an uncertain future. Will technology be different in 18 months when the product is ready to launch? And will the company be able to pay for talent to stay in the enterprise with no income? These early months can be testing times, and challenging for businesses whose directors don’t have staying power. The last thing you want is for one of the stakeholders to relinquish their part of the business. Thus, your early partnerships are crucial.
Failing To Establish Ownership From The Beginning
Ownership and vesting are two of the most common problems in business. Often, early partners have a significant stake in the company but don’t do an awful lot of work to make it a success. As a result, complications can arise in the business. Financial rewards should be based on who has put in the effort and done the hard work of making the business successful. And so vesting issues need to be determined early on.
Photo by Thomas Litangen
Milo Senalle
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