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Starting up a new business takes creativity, determination, and sacrifice. But all your efforts could go to waste if you fail to address certain legal issues that can doom a small business from the start.
Start-up owners may be able to handle a few of these legal issues on their own, but some may require a local business attorney's experience and know-how. It all depends on your specific situation.
In general, here are three legal issues that can doom a small business startup:
1. Forgotten Founders
Getting a new business off the ground is often a collaborative effort. So don't forget the verbal or written promises you made to your early business partners, even when you've had a falling-out, a contributor writes for Forbes.
That "forgotten founder" could come back to haunt you by demanding a share of your business after it's up and running. To avoid this potential problem, try to incorporate your business as soon as possible after early discussions and issue shares to all of the founders, the Forbes writer recommends.
2. Forgotten Legal Agreements
Don't forget to use a non-disclosure agreement, especially if your startup involves a new invention and you discuss your idea with anyone else. In fact, it may be wise to consult a patent attorney and file for a provisional patent, the Forbes contributor suggests.
Also, don't forget about the legal agreements you or your business partners signed with any former employers. A non-compete clause can be explicit or implied.
3. Investment Fraud
Securities laws are complicated, so don't accept any money without first running it by an experienced investment attorney, the Forbes contributor writes. You don't want the SEC, or your investors, to later come after you for any overlooked legal issues that may doom your small business.