Starting a business comes with many moving parts, and legal matters can sometimes fall by the wayside. Unfortunately, legal mistakes can be costly and even fatal to your business. Here are five of the most common legal errors entrepreneurs make and how to prevent them:
1. Operating Without Proper Registration
Too many entrepreneurs start doing business without formally registering their company. This opens you up to personal liability and tax issues. Choose the right structure—LLC, sole proprietorship, partnership, or corporation—and register accordingly.
Tip: Consult with an attorney to decide the best structure based on your risk tolerance, funding goals, and tax situation.
2. Skipping Contracts or Using Generic Templates
Handshake deals and free templates might save time upfront but can cause major issues later. Every agreement, especially with vendors, partners, or clients, should be documented in a legally binding, customized contract.
Tip: Hire a legal professional to draft or review all important contracts.
3. Failing to Protect Intellectual Property
Your logo, brand name, and content are valuable assets. If you don’t register trademarks, someone else could.
Tip: Apply for trademarks and copyrights early. If you create something unique (design, process, software), consider a patent.
4. Ignoring Employment Laws
Hiring your first employee? You need to comply with labor laws, even if it’s just one person. That includes contracts, taxes, benefits, and workplace safety.
Tip: Have employee agreements in place and stay compliant with local and federal employment laws.
5. Non-Compliance With Industry Regulations
Each industry has its own rules. Failing to comply can lead to penalties, revoked licenses, or shutdowns.
Tip: Get a legal compliance review at least once a year to stay ahead.
Final Thought: Legal support is not a luxury—it’s an investment in your company’s survival. Partnering with a reliable law firm can save you from costly mistakes.
