Startup Law

Legal Issues That Could Ruin your Startup

Entrepreneurs tend to have a lot on their mind, but turning a blind eye on legal issues can prove to be a business-sinking mistake. It increases business risks and increases costs. After all, the startups exist within an ecosystem of regulations and policies. So, even though they are preoccupied with their bottom line, but they cannot afford to lose sight of the legal landscape. It’s clear that the entrepreneurs are better off planning well ahead of time than fixing a mistake after a mistake.

Rules of the game

Some laws are faulty and outdated, but they still serve an important purpose. Each and every organization has to comply with rules that protect consumers - especially their safety and health. Therefore, it has to find a way to work within the legal framework and minimize friction with the regulating bodies. This may already seem like a daunting task, but it is only a first step: Startups are also expected to go an extra mile and contribute to the community.

Transparency is highly valued and represents a guiding light when approaching legal problems and challenges. On the other hand, facing harsh scrutiny of state, local or federal authorities is something that can tarnish their image. Bad news can spread like wildfire across social media channels, giving rise to a reputation-shattering hassle. Thus, getting entangled in the legal jungle is not a good idea.

Some startups like Airbnb and Uber might have gotten away with asking for forgiveness instead of permission, but this is a treacherous path to follow. After all, not every enterprise is able to harness “people power” and prompt regulators to back off. Likewise, many startups are not in a position to hire top-notch teams to engage policy makers and find a common language with them. 

Due diligence

There are some pitfalls to avoid in the early stages. For example, one of the most common legal mistakes is picking a logo or brand name that’s already in use. Such a lack of due diligence checks eventually leads to infringement of copyright and trademark laws. Similarly, startups often fail to safeguard their intellectual property or check the availability of a domain name.

Another recurring mistake is overlooking the importance of contracts and documentation. They are not just some formality: They should accompany every business decision and regulate all relationships with outside parties and individuals. For better or worse, a handshake is not a real guarantee in the business world. Also, generic documentation and templates from the internet do not provide valid protection in the wake of a dispute.

Professional support

Furthermore, many organizations have gone under or endured serious blows due to poor legal counsel or not taking one at all. This is severe negligence, since lawyers, who are becoming increasingly specialized, should be present to give assistance every step of the way, be it a liability, lawsuit, zoning compliance, etc. Indeed, there’s a range of professional legal services that startups require:  Real estate, contracts, trademark, incorporation, litigation, patents, bankruptcy, and reputable consumer fraud lawyers.   

These professionals should be contacted as soon as the problem arises. Even better, startups would be wise to act proactively and employ professionals while taking baby steps. On the other hand, hesitation to add staff and support from the start is another pitfall. It may be hard to secure the funds, but the benefits are too great to be missed. So, consider increasing internal capacities and you should be able to navigate legal the waters with strong winds in your sails.

Do not fight, be right

A legal aspect of running a business is the bedrock of success, yet it often doesn’t receive the attention it deserves. Wrestling with the law is certainly something that drains the resources and undermines public image. One must establish a comprehensive legal system from day one and use well-drafted documents and contracts to limit the legal exposure of a business. And those who ignore law do so at their own peril and discover that legal mistakes can and do come back to haunt them: It costs much less to get things right than to put up a legal fight.