• July 2018
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What are top legal mistakes that early stage startups should avoid?

As the CEO (LawTrades) of a startup that helps other startups connect with startup attorneys, here’s what I’ve noticed:

Mistake #1 – Failing to execute confidentiality and intellectual property (IP) agreements. One of the first things a startup should do is to have your founders and employees sign confidentiality agreements. This will protect your proprietary information that falls outside the scope of IP material. It should encompass everything from they way do accounting, to marketing strategies and anything else your company does that is confidential about the way you conduct your business, and gives your company an advantage over the competition. Additionally, securing the assignment of all IP work and development is crucial. As a startup, it’s vital that the company owns all the legal rights to patents, trademarks and everything IP related in order to prevent the possibility of departing founders or employees from sharing your information with your competitors or keeping the rights for themselves.

Mistake #2 – Nonchalantly naming your company. 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 available to trademark, which means doing a thorough search for any names you consider, as well as any similar names.

Mistake #3 – Choosing the wrong structure. It’s one of the most important 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. A knowledgeable startup attorney is the best to help you decide this.

Mistake #4 – Failing to consider the substantial risk of securing too much funding too soon. Raising too much money too soon exposes founders to multiple risks: (1) surrendering too much control to external forces who don’t understand your business, your values or corporate culture; (2) diluting ownership to an extent that it derails your exit plan; and (3) imprudent spending as a result of being inexperienced with how to wisely allocate expenditures.

Our mission at LawTrades is to reduce how many startups experience these types of problems. Our unique pricing options reflect our view that there needs to be personal and affordable, representation for startups. Feel free to message me with any further questions!

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