The economy of the United States is driven by entrepreneurs who create services, products, and jobs. Each month thousands of small business startups are launched; unfortunately, however, half of these businesses are destined to fail within their first five years. While there is no one reason that explains why a large percentage of new business ventures do not survive, business law mistakes have played a role in closing some of these new companies. Knowing these recurring legal mistakes that new businesses make may help your startup beat the odds.
Not Organizing Your Business Properly
When two friends or relatives decide to launch a business venture, it is not uncommon for them to trust each other and overlook the possibility of disagreements arising in the future. However, as the business grows or encounters difficulties, as most businesses do, it is not unusual for disagreements to surface. Whether you have organized your business as a corporation, LLC, partnership or some other legal entity, you must carefully consider and implement your business’s governing documents—these documents will direct, among other things, how decisions are made; how disagreements are resolved; and how, when and if ownership of the business may (or must) be transferred. If your business’s governing documents were not legally drafted and formalized, then you could find yourself in a difficult situation if a minor disagreement turns into a full-blown legal dispute.
Not Creating Contracts That Protect Intellectual Property & Trade Secrets
It is very important for all businesses – but particularly startup companies – to protect their intellectual property and trade secrets. Whether your business creates software or technology; designs or manufactures a unique product; or addresses the need for a service that no one else considered, protecting your proprietary information is vital. By failing to create a contract that protects your brand from infringement, your ideas remain vulnerable to misappropriation by competitors, freelancers, third-party developers, and even initial investors. Almost invariably, when this happens, your business is doomed for failure.
Not Raising Money Correctly
State and federal securities laws – which are laws and regulations that govern some business investments – are a set of complex rules aimed at protecting prospective investors. In some cases, securities laws restrict the manner in which a business can solicit and accept investments for its ideas. When securities are involved, you should consult an experienced attorney before attempting to raise startup money on your own.
Relying On Do-it-Yourself Legal Solutions
Many entrepreneurs realize that legal protections are necessary when starting a business. But, in some cases, instead of consulting an attorney for legal assistance, he or she will attempt to handle those legal needs alone. Online forms do not come with legal instructions or advice—and, while saving upfront costs by foregoing proper legal guidance may be tempting, it usually leads to more costly mistakes being uncovered down the road. By going at it alone, instead of protecting your new company, you could accidentally place your business in significant legal risk and liability exposure.
Protect Your Business Startup – Contact Zwick Law
Protecting your new business venture is possible with the help of a corporate lawyer who offers the legal solutions for your startup. The attorneys at Zwick Law are here to provide your business with the legal advice necessary to:
- Properly form your business entity and craft its organizational documents;
- Effectively guide your business through the acquisition of investments and other financing;
- Skillfully draft and negotiate contracts, from the startup phase throughout all stages of growth; and
- Knowledgeably counsel you and your business to minimize legal risks and liability exposures.
We are standing by to answer your questions and help you move forward with your plans. Contact our office today at 814-371-6400 to schedule a free and confidential consultation. At Zwick Law, we’re always here for you.
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