What Are the Top Legal Mistakes Start-Ups Make? (And How to Avoid Them)
Getting a start-up off the ground can be an arduous task. From securing financing to hiring employees, there are many traps for the unwary. This post summarizes some of top legal mistakes start-ups make and offers advice for how to avoid them.
Failing to execute a written agreement among founders When starting a new venture, it is imperative to plan for both the best and the worst. A founding shareholders or partnership agreement is the best way to avoid disagreements down the road. Some of the key issues to decide and reduce to writing include: the percentage of ownership assigned to each founder, the roles, titles and responsibilities of all founders, any special plans for funding or uses of proceeds or apportioning of profits, the procedures for making day-to-day business decisions, and the methods required to resolve disagreements.
Selecting the wrong business entity There are a number of legal structures available to entrepreneurs, all of which have distinct advantages and disadvantages. While a partnership may involve less paperwork, it does not shield the owners from personal liability for the debts and obligations of the business. While it may be more costly and complex, a limited liability corporation (LLC) or corporation is generally a safer choice.
Leaving your Intellectual property unprotected When it comes to protecting valuable intellectual property, being proactive pays off. Even at its earliest stages, nearly every start-up has intangible assets worthy of protection, such as the company name, logo, and key products. If you fail to obtain the proper trademarks, patents, and copyrights, you may have no legal recourse should a competitor try to use them. In addition, without the proper non-disclosure agreements in place, your business partners or employees could walk out the door with your million-dollar idea. For particularly valuable intellectual property, it may be advisable to establish a separate entity for the ownership of the “crown jewels” for protecting them against future claims.
Mismanaging employees Hiring employees can be an exciting step for a new company. However, it is imperative that you understand your legal obligations as an employer. From tax filings to hiring agreements, there is a lot of paperwork involved. Also, while hiring independent contractors may seem like a great way to avoid many state and federal employment laws, misclassification can lead to significant penalties. So, it’s important to understand the rules.
Thinking you can do it on your own In order to cut costs, many entrepreneurs try to take everything on themselves. This is a bad idea for many reasons. First, you likely already have too much on your plate. Second, when it comes to accounting and legal issues, mistakes can be disastrous, costing your start-up both time and money in the long run. The best course of action is to hire.
Navigating Director and Officer Liability in Times of Financial Distress
Director and officer liability increases sharply when a company is in financial distress. Decisions that would draw little attention in a healthy business can later be challenged by creditors, shareholders, bankruptcy trustees, and regulators as breaches of fiduciary duty, fraudulent transfers, or oversight failures. Understanding where that exposure comes from, and how to manage it, […]
Before You Buy: Managing Real Estate and Permitting Risk for BESS Projects in New York and New Jersey
For developers pursuing battery energy storage system (BESS) projects, finding the right property is only the beginning. BESS site selection is as much a legal and transactional exercise as a real estate decision, with risk analysis central to the project’s ultimate success. Key Takeaways The core questions for BESS site selection in New York and […]
What Business Owners Get Wrong Before Meeting a Litigation Attorney
What should you expect when meeting a litigation attorney about a business dispute? You should expect to describe the dispute in your own words, hand over the most important documents, flag any deadlines or immediate threats, and leave with a clearer picture of the problem, what information is still needed, and the likely next steps. […]
Arbitration vs. Litigation vs. Mediation: What New Jersey Businesses Should Know Before Signing a Contract
Arbitration resolves disputes privately before an arbitrator whose decision is usually final, while litigation resolves them in court with full rights of appeal. Whether a business ends up in arbitration or litigation is often decided when it signs the contract, long before any dispute arises. Key Takeaways When facing a contract dispute, carefully consider your […]
Can You Own Part of a New Jersey Business Without a Written Agreement?
Can you own part of a business in New Jersey without a written agreement? Yes, it is possible. Under New Jersey’s Uniform Partnership Act, a partnership can arise when two or more people carry on a business as co-owners for profit, whether or not they ever intended to form one. Ownership doesn’t necessarily depend on […]
Crisis-Proofing Your New Jersey Business: Building a Crisis Response Plan Before You Need One
For New Jersey businesses, crisis preparedness should be viewed as a legal and operational function, not simply an emergency-management exercise. A well-designed crisis response plan can help preserve evidence, protect confidential communications, meet reporting obligations, limit unnecessary exposure, and prevent an already difficult situation from becoming a larger legal problem. Key Takeaways A serious crisis […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
