4 Common Legal Mistakes that Startup Companies Make
Startup companies should prioritize complying with the legal requirements that come with running a business and becoming an employer. Oftentimes, the legalities of starting a business are overlooked because the business owner does not know what the requirements are. Failing to pay attention to these issues could result in significant liability for the company and its owners so it is a good idea to make sure that your liability is minimized from the start. Here are 4 common legal mistakes that start ups make:
1. Failing to select the appropriate entity type – Deciding on the correct type of entity for your business requires a review of factors to determine which structure best fits your needs. Forming an entity is not a one size fits all approach and should be carefully considered at the outset. Currently, limited liability companies are a popular choice but startups need to be aware of their limitations as this entity has certain restrictions. Changing an entity type once the business has started operating can be costly and time-consuming.
2. Failing to make sure brand names and logos are clear – Before you design your website and pay for marketing, it is a good idea to make sure your brand name and logo are not already in use by another company. The last thing you want is to waste a lot of money on creating and marketing your brand and then receive a cease and desist letter informing you that you are infringing on someone else’s brand.
3. Not documenting your company’s relationships in writing – A written agreement should be used to formalize relationships between the company's founders as well as anyone who the company has a relationship with – clients, suppliers, service providers, employees, independent contractors, etc. Contracts are essential to memorialize relationships and spell out duties, responsibilities, limit liability and account for all the “what ifs” that can happen.
4. Not complying with Labor and Employment Laws – it is important to classify exempt versus nonexempt employees correctly as well distinguishing between employees and independent contractors correctly. Failure to do so can lead to substantial liability and hefty fines. As your company grows, there are more employment laws that must be complied with so it is a good idea to get a concrete understanding of these before enlarging your workforce.
The information listed above is not a comprehensive list of all items that need to be addressed when forming a company. There are many other areas that can lead to liability so it is a good idea to have a consultation with a business attorney to make sure your business is starting off on the right track. It is important to contact a Florida licensed business attorney if you’d like to discuss legal compliance for your business. Wheeler Legal PLLC would love to assist your Brevard County business. Please contact us by calling (321) 209-5995 to find out how we can help you.
Disclaimer: The information contained above is provided for general informational purposes only, and does not constitute legal advice, nor is it intended to create an attorney-client relationship. This firm aims to provide quality information, but we make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this post. Nothing provided herein should be used as a substitute for the advice of competent counsel.