Starting a new company can be very exciting for founders. When a business finds a niche and markets a unique product or service, there is no reason why it cannot succeed.
Nonetheless, it isn’t that easy. The harsh reality is that many startups fold within the first year. Sometimes, a new business can run into trouble because legal factors have been neglected.
Here are two legal errors that startups should avoid.
1. Not having a partnership agreement
Often, two or more individuals go on to form a business partnership. This may exist between two friends, colleagues or people who have met through networking. For months or even years, ideas may have been bounced around about forming a company together.
When partners act and form a business, it’s important to have formal arrangements like partnership agreements in place. This ensures that everyone knows where they stand in terms of profit shares, responsibilities and exit strategies.
Informal arrangements between business partners are a common source of legal disputes.
Not thinking about intellectual property
In business, branding is everything. You can have a great product or service, but you need to market that to customers via your brand. The essential components of your brand include your company name, logo, designs, technology, recipes and slogans. This is your intellectual property.
There are two key considerations with intellectual property. Firstly, you need to ensure that nobody can steal what makes your brand unique. Secondly, you need to make sure that you haven’t accidentally copied anyone else. There are databases that allow you to check whether or not intellectual property is already in use.
To give your new business the best chance, it may benefit you to seek legal guidance.