5 Legal Essentials for Business Founders

Young marketers having a brainstormingIf you’ve ever indulged in reading Silicon Valley drama, you’re bound to have heard about business founders who ended up getting in serious trouble because they didn’t protect themselves from legal issues. Whether it’s the cofounder who got diluted out of his own company, or the executive who went to prison for securities issues, we’ve all heard the consequences of being reckless. Here’s a look at the legal essentials, so you can ensure this never happens to you.

5 Legal Essentials for Business Founders

  1. Have a clear deal with cofounders: When one person is only protected by a handshake, things get bad. Have a crystal-clear understanding of who gets what. Hire a good business lawyer to write up the paperwork, and make sure you have your own representation to ensure you get what you deserve. Whether you are dealing with banks, partners or venture capital, you need a lawyer.
  2. Separate the business from personal assets: Make this mistake and you may end up losing much more than your business if things go south. Consult a business attorney to find the best options for separating your business and personal life. In the early phases that may mean setting up an LLC. Later, you might build a corporation. The crucial part is that you separate your business from your personal assets to protect yourself and your family.
  3. Get solid on SEC compliance: Trust us, you never want to be in trouble with the Securities and Exchange Commission. Business owners have gone to jail for foolish mistakes. If you are selling stock, you need a securities lawyer.
  4. Protect your intellectual property: It doesn’t matter what you have invented or how good your product or service is; if you don’t have patents and/or non-compete agreements, there is nothing to stop someone from taking your ideas and products for themselves.
  5. Set up documentation for your team: Small teams can be friendly and informal, but you still need to follow employment laws. It may seem like your team is too close-knit to worry about issues like employment discrimination or sexual harassment, but you should have a lawyer help draft company policies and handbooks as a precaution. If something goes wrong, you’ll be glad you protected the company.

As a founder, you would most likely prefer to focus on your product, but too many businesses have failed because owners didn’t take the necessary protective action. Be smart, and don’t cut corners. Get these basic legal issues handled before it’s too late.

Garland & Mason, LLC is a New Jersey business law firm with expertise in matters such a business transactions, real estate and business litigation.


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