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10 Legal Mistakes Start-Ups Make (And How To Avoid Them)

As a start-up owner, you probably already know that the legalities need to be your top concern from the very beginning – but what should (or, more accurately, shouldn’t) you be doing?

1. Neglecting the basics

Corporate solicitors

will advise you on a whole gamut of legal documents and frameworks that you ought to complete as soon as possible in order to protect your business’s interests. Many of these are not legal requirements (though they do make good business sense), but some are absolutely essential.

There will be agreements that your business is required to have in place from the beginning and overlooking these will represent a monumental mistake for your start-up.

2.  Non-compliance with data regulations

You’ve likely heard it said a thousand times already that data is a business’s greatest asset, but this can only be true if you are taking the proper measures to secure your data, and ensure that you are compliant with GDPR or other data protection laws depending on which countries you do business in. Compliance is a legal requirement, so you must not overlook or skip this step.

3. Failing to register the proper business structure

The moment you determine what your company’s structure will be – for instance, whether it will be a limited company or a sole trader – will, in many ways, also represent the moment you determine the business’s future. How it will operate and perform under one structure will differ significantly from another.

Not just that, but it will also alter your business’s implications for tax, too – another compelling reason to talk things through with your solicitor about the best legal structure and make the decision sooner rather than later.

4. Failing to protect their intellectual property

Alongside your company’s data, your intellectual property (IP) will represent an asset of pivotal importance. Disclosing any information pertaining to your IP without having the proper protections in place – i.e., a patent or copyright protection – means that your IP can be used by another business, and that you could even face legal ramifications for using what is, rightfully, yours.

5. Failing to put the right employment contracts in place

Any strong business will have prioritised creating solid, mutually beneficial employment contracts. A good business is one that is run by a workforce that feels confident that their interests are being met, but it is also one that is up to date with the requirements of employment law, and proactively protecting itself against unwanted situations.

6. DIY documents and not seeking legal advice from corporate solicitors

Even someone with the best head for business needs to be able to call upon the help and guidance of an experienced corporate solicitor. There are so many different aspects of corporate law to understand, and all of them are apt to evolve over time, and expecting yourself to be able to keep on top of them (and interpret them correctly) is risky and is best left to a professional to advise you.

7. Not putting agreements in writing

While it can be tempting to enter into agreements on faith, particularly if you have a strong network of contacts around you, it is a major mistake. Agreements that are not underpinned by the right documentation can easily fall apart and potentially lead to expensive and lengthy court disputes.

8. Not complying with business tax law

For obvious reasons, failing to meet the tax requirements for your business can prove ruinous. Keeping your financial obligations in order from the moment you begin trading is absolutely essential.

9. Inadequate filing systems

Expect paperwork – and lots of it – to come your way. And, in so doing, prepare for it by creating a strong and easy-to-use filing system to help organize your business and enable you to find crucial documents later down the line. While this point isn’t strictly a legal mistake, if not managed well it can become a real headache, so following this advice does make it easier to comply with the rest, and to not make a mistake further down the line.

10. Burying your head in the sand when it comes to legal challenges

When you have an endless list of things to do (something any start-up owner will know all too well) there will be moments when you want to bury your head in the sand and hope that an issue will resolve itself. While this may work for some low-importance things, it will not work for legal challenges, and that’s why you should seek the support of a strong corporate solicitor from the very beginning – to help you mitigate business risks in the short and long term future.

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