What Are the Top Legal Mistakes Start-Ups Make? (And How to Avoid Them)
Getting a start-up off the ground can be an arduous task. From securing financing to hiring employees, there are many traps for the unwary. This post summarizes some of top legal mistakes start-ups make and offers advice for how to avoid them.
Failing to execute a written agreement among founders When starting a new venture, it is imperative to plan for both the best and the worst. A founding shareholders or partnership agreement is the best way to avoid disagreements down the road. Some of the key issues to decide and reduce to writing include: the percentage of ownership assigned to each founder, the roles, titles and responsibilities of all founders, any special plans for funding or uses of proceeds or apportioning of profits, the procedures for making day-to-day business decisions, and the methods required to resolve disagreements.
Selecting the wrong business entity There are a number of legal structures available to entrepreneurs, all of which have distinct advantages and disadvantages. While a partnership may involve less paperwork, it does not shield the owners from personal liability for the debts and obligations of the business. While it may be more costly and complex, a limited liability corporation (LLC) or corporation is generally a safer choice.
Leaving your Intellectual property unprotected When it comes to protecting valuable intellectual property, being proactive pays off. Even at its earliest stages, nearly every start-up has intangible assets worthy of protection, such as the company name, logo, and key products. If you fail to obtain the proper trademarks, patents, and copyrights, you may have no legal recourse should a competitor try to use them. In addition, without the proper non-disclosure agreements in place, your business partners or employees could walk out the door with your million-dollar idea. For particularly valuable intellectual property, it may be advisable to establish a separate entity for the ownership of the “crown jewels” for protecting them against future claims.
Mismanaging employees Hiring employees can be an exciting step for a new company. However, it is imperative that you understand your legal obligations as an employer. From tax filings to hiring agreements, there is a lot of paperwork involved. Also, while hiring independent contractors may seem like a great way to avoid many state and federal employment laws, misclassification can lead to significant penalties. So, it’s important to understand the rules.
Thinking you can do it on your own In order to cut costs, many entrepreneurs try to take everything on themselves. This is a bad idea for many reasons. First, you likely already have too much on your plate. Second, when it comes to accounting and legal issues, mistakes can be disastrous, costing your start-up both time and money in the long run. The best course of action is to hire.
What to Do If You Are Impacted by a Retailer Bankruptcy Part 2
Over the past year, brick-and-mortar stores have closed their doors at a record pace. Fluctuating consumer preferences, the rise of online shopping platforms, and ongoing economic uncertainty continue to put pressure on the retail industry. When a retailer seeks bankruptcy protection, a myriad of other businesses are often impacted. Whether you are a supplier, customer, […]
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business
Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1
The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]
How Understanding Bankruptcy Trends Can Benefit Your Business
The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]
SEC Takes Actions Against Issuers for Failure to File Form D
In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda
On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
