Running a startup is never easy, and one wrong move can destroy your business entirely. Not only will you have to worry about day-to-day operations, but you also have to learn how to navigate the complexities of business law. But unlike multinational corporations, small businesses often lack the resources to retain a lawyer, let alone an entire legal department.
The fact remains that to succeed in today’s hyper-competitive business environment, you need to learn how to prevent legal issues and deal with them should they arise. Don’t wait until you’ve heard from a subpoena server before securing legal protection. The law might seem intimidating, and regulations often feel like they stifle innovation and progress, but if you play your cards right, you’ll find that the law is a net benefit.
Here are some of the most common issues that entrepreneurs face and how to deal with them:
Choosing the wrong business structure
The first few years of a new business are often dedicated to product development. Founders are focused on creating a product, developing a marketing strategy, and earning a profit. But once the company progresses past the series A stage and becomes more stable, many founders realize that they chose the wrong structure.
Business terms like partnership, sole proprietorship, limited liability company, and corporation can all seem confusing and vague. Still, if you don’t know what each structure entails, then you open yourself up to possible legal issues down the line.
Many startups begin the same way: with a group of people sharing the same vision. Starting a business with friends often sounds like a good idea. You can innovate together, share resources and workload, and even act as early investors to the business. But once you get past the startup stage and become a full-fledged business, there will be times when the original founders get into disagreements.
Regardless of the strength of your relationships, you shouldn’t start a business with someone without a bulletproof shareholders’ agreement. The document details the rights and responsibilities of shareholders and the structure of the business and management. Without a shareholders’ agreement, you’ll find it more challenging to attract investors.
Intellectual property disputes
If you think that only tech companies need to think about intellectual property issues, then you’re gravely mistaken. All businesses, from bakeries and flower shops to retail stores and fitness gyms, have a unique corporate identity that allows for differentiation in the marketplace. Names, logos, product formulations, and even color schemes all fall under intellectual property.
If you don’t file for intellectual property protection early on, you might find yourself dealing with issues such as intellectual property theft and infringement. And nobody wants to get bogged down in an intellectual property dispute.
Starting and running a business has become more complicated in recent years, and it’s clear that you need to educate yourself on the basics of business law just to survive in a competitive environment. You need to think ahead and prepare for any legal problems by securing legal advice whenever necessary.