What are some common legal mistakes committed by startup founders?

Entrepreneurs who neglect the legal basics can collapse a business before it even gets started. Below are three of the most common legal errors that startups make.

Mistake #1: Not asking, “What’s in a name?”

Choosing a name is one of the first decisions you’ll make as a new business owner, but before you even get started on this, there are some legal matters you’ll need think through. Your job at this point is to find a name that is all yours to trademark, which means doing a thorough search for any names you consider, as well as any similar names. You don’t want to print a truckload of t-shirts with your logo on them, only to find out that there’s already a company in Iowa with the same name.

Mistake #2: Failure to protect your property

When you are establishing your startup, it’s vital that you obtain any relevant trademarks, patents, or copyrights before your intellectual property is out for public consumption. The obvious risk you run by not doing so is that, if unprotected, your creations are fair game for competitors to steal. Read more: At what point in a startup should you file a trademark?

Mistake #3: Wrong structure

It’s one of the biggest questions facing any new business owner: What legal structure will your company have?

Your choice of business structure should be informed by a thorough and honest appraisal of your company, and of your own strengths and weaknesses as an owner. If you really relish the idea of being your own boss, a sole proprietorship may be the way to go. Still, it’s worth considering whether you might benefit from forming an LLC and bringing in other members. Raising money? Then maybe a C-Corp will suit you best. Read more here.

Hope this makes you a little bit more informed 🙂

Still got questions? Check out: LawTrades.

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