Launching a company is an exciting process. So exciting, in fact, that many entrepreneurs forget their legal duties. And that can be a problem.
Not only do founders risk legal liability themselves, but they can also put their entire company at risk, especially if their business depends on legal protection in some form.
Take a look at some of these stupid legal mistakes founders make when setting up their companies so that you can avoid them yourself.
Merging Personal And Business Accounts
Startups, by their nature, are often low on funds. Because of this, many founders dip into their personal assets to keep their businesses afloat. Dipping into one's personal assets is one thing, but mixing personal and business accounts is quite another.
The problem with this is that personal assets which have already been taxed can then be subject to business rates. Furthermore, drawing on money from the business could be deemed as additional income, even if it is just money coming back around from a personal account. New entrepreneurs, therefore, should try to avoid mixing accounts until they have spoken to a professional money manager about the most tax efficient and safest way of drawing money.
Failing to Protect Your Intellectual Party
Startups are particularly vulnerable to other businesses copying their ideas, especially if they don’t have any legal protection. Patents, trade secrets, and licensing are essential for entrepreneurs who want their startups to remain valuable to potential buyers. That means taking precautions whenever possible, making new employees sign NDAs, and ensuring that data privacy is a priority.
Pay Close Attention To Local Employment Laws
As your company begins to flourish, you'll likely take on contractors or employees. According to Ogletree Deakins Law Firm, some new businesses fail to comply with employment law adequately. When they do, they get into trouble. Entrepreneurs need to make sure that all their workers are here legally, that the relevant company policies protect them, and that they receive their statutory benefits. Startups are notorious for focusing on skill requirements, without providing the appropriate protections or checks for their employees.
As soloprenuers, we often have aclear vision of how they want their company to be presented, and that includes the name. But more often than not a name is taken, and this can bring up issues of trademark violation.
Ideally, you want your company to have a unique name. The reason for this is that you do not want an established player claiming that your name is invalid because customers might confuse your brand with theirs. Though it is unlikely if they operate in a different industry, it is still a risk, and it could mean that you waste a lot of money on marketing material. Checking whether a name is taken is easy: Companies House has a name availability checker on its website.
Do you Have An LLC?
Many entrepreneurs begin as sole traders and then develop entire businesses around their core activity. Usually, this is fine, so long as the individual does not take on a lot of debt. But it can become a problem if debt is needed to get the business up and running. Limited liability companies remove personal debt risk, so these are the best option for founders.
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