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5 Legal Mistakes That Entrepreneurs Make

By Deanne Katz, Esq. | Last updated on

No one is immune from mishaps, and entrepreneurs -- especially those just starting a business -- have their fair share of oversights, including legal mistakes.

Unfortunately, those kinds of mistakes can have a big impact on your company down the line, as one young entrepreneur recently described on his blog. Businesses are heavily regulated by a variety of laws, and failing to keep your company in line can have long-term consequences.

But you don't have to make these mistakes to learn from them. Here are some of the most common legal mistakes that entrepreneurs make so you can avoid making the same ones:

  1. Not setting up employment agreements. If you're going to hire people, then you need to treat them like real employees. That doesn't mean you have to act like all the bosses you hated, but you should formalize the terms of employment with a signed written document. If something goes wrong later on, then you have written proof of the employee's job expectations.

  2. Putting off incorporation. Yes it costs money and the paperwork takes time, and you might need an attorney to make sure you've done it right. But if you don't take the time to incorporate when you start your business, you could end up losing the company down the line. This is one mistake you don't want to make.

  3. Failing to get a license. Depending on what kind of business you have, you may need a license. Whether it's a business license, a food and drink license, or a zoning permit, make sure you have it all in order before you start selling to customers -- unless you have lots of cash on hand to pay a fine.

  4. Writing contracts without help. You probably started your company because you're the expert at what you do, but that probably means you aren't an expert at legal language. If you expect your clients to leave it you as a pro, you also need to rely on professionals for important things, like making sure your contracts are binding so you'll get paid.

  5. Ignoring intellectual property. This one is a double whammy. Many entrepreneurs fail to do their homework on whether they're infringing on someone's copyright or trademark. But many also fail to register their own trademarks to prevent infringement by others. If you have a name, logo, or tag line you need to make sure your intellectual property isn't going to cause a problem.

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