The legal landscape is changing, and startups are adapting to stay ahead of the game. As laws continue to evolve, it’s important for companies to understand how their business might be affected by the law.
The small business lawsuit cases 2020 is a new trend that has been seen in the last few years. With this, small businesses are not taking any chances and trying to keep their startup safe from legal trouble.
It’s normal to want to concentrate on the things you want to achieve and accomplish when you’re first starting out in company, and to put some of the more time-consuming tasks on the back burner.
What creative wants to get mired down with the nitty-gritty of paperwork, papers, and contracts when they’re the inventor and dreamer?
However, neglecting these issues at the start of your firm may jeopardize your company’s long-term viability.
On the seventh edition of The Bcast, Bplan’s official podcast (at 9:31), Peter, Jonathan, and Caroline Cummings discuss the difficulties that companies face at the outset: Subscribe to The Bcast on iTunes by clicking here »
Frequently, it isn’t the apparent danger that seems to be staring us in the face that brings a firm down, but rather a seemingly little mistake.
Here are a few things to keep an eye on before they turn into bigger issues.
Make sure you’re not breaking any labor regulations.
While it may seem that following the law is a no-brainer, it is easy to find yourself in breach of your state’s employment rules without ever realizing it.
Employees, contractors, or a mix of the two may be on your payroll. While you may not give the distinction between employee and contractor much consideration, there are significant legal differences between the two.
If you start treating your contractors like employees, they’ll be treated as such under the law, with all the consequences it entails. When you’re recruiting new employees for your firm, ensure sure you and your new recruits both understand their roles and that you keep to those definitions.
If you have any questions regarding employment law, the US Department of Labor has a handbook on federal rules. If you want something more customized, a simple Google search may help you discover local employment attorneys.
Begin with the correct entity.
Many entrepreneurs lack expertise in areas such as company law and incorporation, and many more are working on a shoestring budget.
Far too many entrepreneurs make errors in establishing their businesses as a result of attempting to handle early legal issues on their own. These mistakes may be expensive in the long run.
When forming a company organization or structure, it’s generally a smart investment to hire a lawyer to ensure that everything is done correctly the first time, rather than paying to fix mistakes afterwards.
When establishing a company organization, many entrepreneurs choose an LLC or a C corporation, but consulting with an attorney is the best method to identify the right choice for you. If you want to learn more about the many kinds of corporations, Valcu creator Mark Oblad’s blog is an excellent place to start.
Collaborate with the appropriate individuals.
Starting a company with one or more partners is similar to getting married, with all parties involved making a significant commitment with good intentions.
However, just as in marriage, you don’t want to start a company with someone you don’t get along with. We’d all want to think of ourselves as thoughtful and easygoing, but the reality is that we all have our own idiosyncrasies and characteristics that may either charm or irritate others.
The startup industry can be a grueling environment, and not everyone is cut out for it. Your company can’t afford the delays that come with continuous squabbles and squabbles.
Before you get in, be sure your potential business partners are individuals you can work with in the long run.
Have agreements with the founders in place.
So you followed all of the recommendations in the previous section and performed your due diligence on your co-founders before launching your business, but it didn’t work out.
One or more of your partners has chosen to quit, and apart from the emotional toll this may have on a company, there may also be legal or financial ramifications if you haven’t prepared ahead of time.
When you first start out, you should have all of your co-founders sign a founders’ agreement to prevent any problems with ownership, equity, or voting rights. Another area where we all want to think we know enough about the individuals we’ve worked with to believe they’d behave ethically, but hoping for the best isn’t enough.
Preparing for the potential that one of your co-founders may quit, or that you will have to force them to go, can prevent your business from being even more tumultuous.
If you’re not sure what to include in your founders’ agreement, check out Entrepreneur’s blog for a list of the most essential topics to include.
Assign the company’s intellectual property.
It’s normal to assume that the work produced by your workers or contractors belongs to your business and will follow them if they decide to quit.
After all, you’re paying them salary or wages in return for their services, therefore you should be able to claim ownership of the job they’ve done for you. However, the legislation governing this may be complex, which is why your business should be prepared. New workers or contractors should sign agreements as part of the recruiting process that indicate that any work produced belongs to the business.
When it comes to co-founder exits, ownership problems are another source of worry. If you’ve applied for patent, trademark, or copyright protection on works produced by your business, but the application was made in the name of a single co-founder, the rights to those works may be in dispute after the split.
To guarantee a clean split should someone quit the firm, designate your intellectual property to the business entity rather than a person when applying for protection.
Now is the time to deal with issues, not later.
The most common mistake made by startups is thinking that all of the aforementioned problems, as well as others, can be addressed with later.
By the time these little issues become major issues, it’s usually too late for your employer to attempt to resolve them in a manner that isn’t unpleasant to you and the firm. Nobody has the insight to predict when catastrophe will hit.
While it would be wonderful to be able to prevent it entirely, prudent company owners take the necessary precautions to plan for the worst-case situations that might occur.
It may seem to be a nuisance or an unnecessary drain on your limited resources to handle areas you don’t believe you’ll ever need to worry about, but doing things right the first time costs a lot less.
Visit Traklight to learn more about your company’s dangers.
Disclaimer: The material in this article is meant to be general in nature, and nothing in it should be construed as legal advice. Before making any intellectual property or other legal choices, please get legal advice.
Could a lawsuit have been prevented? When your startup is in the early stages, it’s important to know how to avoid legal trouble. Reference: could a lawsuit have been prevented.
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