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.
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Pet Trusts in New Jersey and New York: A Practical Estate Planning Tool
For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
For many New Jersey business owners, a closely held company represents decades of work, financial investment, and personal sacrifice. Trusts in business succession planning are one of the most effective tools for protecting that value, allowing founders to control how and when the business passes to the next generation while reducing the risk of disputes, […]
Read Before You Sign: IT Contract Pitfalls Every NJ Business Should Know
In today’s digital economy, New Jersey businesses of all sizes rely heavily on technology vendors, software providers, cloud platforms, and managed IT services. Whether your company is purchasing software, migrating data to the cloud, engaging a cybersecurity consultant, or entering into a long-term managed services agreement, a careful IT contract review can have significant operational, […]
Non-disclosure agreements (NDAs) remain a critical tool for protecting sensitive business information. However, New York NDA requirements have evolved, and businesses must ensure these agreements are carefully drafted to remain enforceable. In a competitive market like New York City, NDAs are commonly used to protect proprietary information, client relationships, and strategic plans. At the same […]
How Courts Evaluate Testamentary Capacity and Undue Influence Will contests in New Jersey are difficult to win, given the strong presumption that a properly executed will reflects the testator’s intent. However, challenges based on lack of testamentary capacity and undue influence remain common, particularly where there are concerns about mental capacity or the involvement of […]
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!
