4 Legal Mistakes Of New Businesses

When it comes to running a business, the things you need to know can seem a bit overwhelming to say the least. So many potential minefields await when we don’t do things right from the start. It is a given that mistakes will be made at some point, but ideally, they will be in the realm of smaller matters with less serious consequences. We want to do all we can to avoid the big ‘blow ups.’

One area to which you want to pay particularly close attention is anything falling under the realm of legal issues. Here are some of the top legal mistakes made by new businesses

Not Using Advisors to Review Financing Term Sheets

If you are relying on investors for any portion of your small business funding, it is important you have an experienced advisor go over the financing term sheets for each one. People who invest professionally use a number of different approaches, and you probably don’t fully understand the nuances of each one.  A financial professional does however, and is invaluable in guiding you in the process.

Not Complying with Federal and State Securities Laws

Securities law can be quite complicated, and unless you have prior experience in this area, it would behoove you to consult with an attorney who specializes in this practice area to ensure you are complying with any laws applicable to your business. The excuse of ‘not knowing’ will probably not hold too much water should you find yourself in violation of any of these laws. If you are ever unsure about something, don’t assume, talk to your lawyer.

Failing to Address Vesting and Ownership Rights from the Start

It is crucial you address this issue right from the start, or there can be problems down the line. In many businesses, those who were there from the start may fall away, and support you counted on from them down the line will no longer be available—and, often times, they hold ownership that is better left for people who are more productive and valuable. When it comes to vesting, it should be based on roles and time spent with the company, not something like ‘who was there first.’

Putting Off Issues until ‘Later’

Unless you are the most motivated, no nonsense of people, you probably have a tendency to want to put off difficult issues until a later date; you just don’t want to deal with it now, and you tell yourself it is fine to take care of it later. But, if you want your business to be successful, and you want to avoid snafus down the line, legal or otherwise, it is best to nip these issues in the bud later. Putting it off can have serious consequences for various aspects of your business, particularly financial.

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