Entrepreneurs have a lot on their plate, including generating revenue, developing a concept, building a team, implementing strategies, and more. Any legal issues that slip through the cracks in the process are often only addressed when absolutely necessary, which ultimately results in severe financial losses and negative consequences.
The reality is that incorporating a business involves a lot of legalities, many of which are overlooked by startup entrepreneurs at their own risk. Legal mistakes can be costly, and it can be challenging to figure out how to protect your company from lawsuits. A business needs to stand on firm legal ground, which is why investing in a business lawyer is a fantastic idea.
As beneficial as a business lawyer can be, not every company can afford one. If bringing one on board isn’t currently a possibility for you, we’re here to give you a rundown on three major pitfalls that you should steer clear of to keep your business running smoothly and legally.
1 – Putting Off Business Incorporation
Incorporating your business should be the first legal step of any startup entrepreneur. However, many tend to put it off due to its hefty price tag. It includes legal and tax fees on top of government-imposed fees, all of which are crucial for establishing a legal entity. To that end, incorporating your business shields entrepreneurs from personal responsibility in the unfortunate event of legal issues. It also protects your assets if and when your company is sued.
2 – Not Protecting Your Intellectual Property
An idea is only as good as its legal ownership, which means that any unique product or service under your business does not guarantee you have full control over it if it’s not protected. In that regard, there are four types of intellectual property: patents, trade secrets, copyright, and trademarks.
- Trademark – This is what identifies your startup’s product and distinguishes it from your competition. Any products made by your company should be registered with IP Australia for your business to have full rights over it.
- Copyright – This protects written work and enables you to send copyright notices in the event that a company infringes on your rights. Your copyright can apply even without registration and can easily be exercised with a copyright seal on all your written work.
- Trade Secrets – This is highly essential, as it is what keeps your products or services distinct. Think of it this way—imagine if Coca-Cola or Kentucky Fried Chicken’s secret recipe was revealed to the public. There would no longer be any point to continue purchasing their product since everyone would have the formula necessary to make it themselves. In that regard, it’s crucial to sign non-compete agreements and non-disclosure contracts before revealing anything about your product.
- Patents – Another vital function of any business, patents give your company the right to prevent others from selling, using, making, or profiting off of your invention.
3 – Putting Off Equity Arrangements
Startups can’t live on high hopes alone while establishing a business, especially with co-founders who may jump ship once operations start to go south. On that note, 60% of founders end up in court due to a dispute over equity distributions, all of which can be avoided if you make equity arrangements early on.
Business lawyers play crucial roles not only in the establishing of a business but in its healthy growth. If it isn’t time for you to bring someone on full-time, consider seeking a consultation with a licensed solicitor at a commercial law firm.
GLG Legal offers a range of corporate and commercial services tailored to clients needs. Get in touch with us for expert advice on how you can make the legal side of your business bulletproof!