Legal Mistakes Way Too Many Startups Make

Startup owners are faced with so many different things that have to be taken care of. The list of things to consider is so long that most business owners end up feeling overwhelmed. Unfortunately, many of the mistakes that appear are connected with legal or financial problems. Seattle malpractice lawyers say that many financial problems do appear because of improper legal decisions. If you are an aspiring entrepreneur, always remember the following vital legal tips.

1. Not Having Clear Deals Signed With The Co-Founders

It is hard to start a business alone so it is common practice to have co-founders. Unfortunately, in many cases we see that there is absolutely no agreement between the people that launch the company. This can easily cause huge problems at later point in time. One clear example of that was the Facebook litigation between Zuckerberg and Winklevoss. What is vital is to list all the terms that have to be addressed and that may come into question in the future. You want to talk about company ownership percentages, responsibilities, roles, what happens when one founder leaves, salaries, who the decision makers are, what assets are brought into the firm and so on.

2. Startups That Are Not LLC Or Corporations

Unfortunately, statistics show that most startups fail in their first year of existence. This can happen due to many reasons. Since you are faced with such bad odds, you want to be sure that you start your business either as LLC or as a corporation. When the business is started many do not talk to a lawyer. This automatically means that higher taxes can appear in the future. Also, if something goes wrong, you may be faced with many financial obligations that could have been avoided from the start.

3. No Employment Documentation

Many startups face problems as they fail in maintaining an adequate documentation in regards to employment. You want to prepare the main employment document groups that are going to be signed by the employees right from the start. Employment contracts are very important and documentation should be kept in check. This includes confidential information, stock option documents and everything else connected to the work of the employee.

4. Not Protecting Intellectual Property

Modern startups are usually launched as they developed unique technology, services or products. Whenever this happens it is really important that all intellectual property is protected. Company founders and the investors need to be sure that third parties will not be able to use the intellectual property and that what is launched does not infringe on a third party’s rights. Fortunately, many protective measures exist for the startups. This includes patents, trademarks, copyrights, trade secrets, NDAs and so much more.



When launching a startup you normally think about the product or the service that was developed but a failure to take into account the legality of the matter is something that will lead to many different problems in the future. The truth is that every single business needs legal representation. Make sure that you hire one that has high business experience in order to receive the best possible legal advice.


by Boris Dzhingarov