One of the prevalent errors made by new business owners/ Start-ups is not to engage start up legal services to handle probable issues for their new venture. Beginning an enterprise needs planning and Formulating not only for Business model, marketing and growing the business but also to eliminate the legal risks faced by start-ups. Such risks can quickly upset a new company/ Start-up even before it starts running its operations. The following are the significant legal risks faced by start-ups today.
Every aspect of running a business is governed by one or the other law and entrepreneurs must know about all the regulations which affect their organization. The following list of major legal hazards faced by new companies will be helpful for individuals looking to begin a commercial venture.
1. Incompatible Legal Structure
One of the most important decisions that new business owners have to make is regarding an appropriate legal type for their new venture. The legal type of business chosen has an impact on the funding options for the company, its tax responsibilities, and the personal liability of the owners. The correct format can help save taxes as well as protect the personal assets of the proprietors in times of crisis. Investors also want to ensure that they are funding a dependable entity which makes it necessary to hire experts to identify the most suitable legal structure for the new entity.
2. Founder’s Agreement
Most new ventures are the product of the combined efforts of more than one individuals. The founders who are instrumental in the inception of the new company can also cause its closure. The closure can happen in the case where the roles and responsibilities of all the co-founders have not been delineated clearly. A founder’s agreement which clarifies the ownership of each member along with their duties towards the organization must be framed right at the beginning. It must also contain the manner in which the equity of a person will be dissolved when he/she wants to exit the business.
3. Applicable Tax Laws
The ignorance of relevant tax laws is the cause of one of the most significant legal hazards faced by start-ups. Enterprises must know about applicable taxes and the various returns to be filed in the jurisdiction where they are located. They must be aware of the documents that must be maintained for the purpose. For instance, a venture in Bangalore must hire start up legal services in India to learn about applicable taxes and get assistance on compliance matters.
4. Proper Licenses
Every business act falls under the purview of legal regulations. Businesses must know the licenses and permits they need to have in order to function without trouble. Non-compliance with regulations can have serious legal ramifications for an organization. It can lead to hefty monetary penalties which can cause financial losses. Company owners must engage Legal experts to know about all the legal permissions they need to possess in order to run their organization.
5. Using Standard & non-specific Content for Website Privacy Policy
Every modern business invests in a website to promote its products or to use it as a platform for conducting business. They access personal information of visitors to manage sales or their marketing campaigns. More often than not they use generic content for the privacy policy displayed on the website which makes them susceptible to be sued for breach of personal data laws. They must get a policy drafted by legal experts which tells users about the information collected by the interface, the purpose behind its collection, its sharing, usage, and the steps taken for its protection.
6. Protection of Intellectual Property Assets
Another common legal hazard with grave financial repercussions is no or improper protection of the Intellectual Property (IP) assets of a company. A unique product or an idea must be shielded with a patent while the brand name, logo, etc. must be secured with trademarks. Copyright laws must be used for obtaining the right to use original works of authorship like software or advertising content. Correctly obtain copyrights and authorship will help the organization safeguard its valuable assets from unauthorized usage and protecting its right to commercially exploiting the assets.
7. Employee Agreements
Failure to maintain adequate employment documentation can cause hassles for a start-up. Companies must hire experts to draft agreements and contracts for formalizing the employment of permanent and temporary workers. These documents must contain the terms and conditions of employment and clearly define the individual’s duties and the compensation being paid to him/her. Moreover, they must provide all staff members with employee handbook which clarifies their policy on leave, employee benefits, healthcare, etc.
8. Conclusion
All entrepreneurs embarking on a new business venture must search for and engage professional legal services for start-ups . Start-ups may not want to spend money on legal advice, but it can help you avoid legal pitfalls and protect your assets.
Taking the step will help avoid legal risks faced by start-ups and ensure that their commercial project begins smoothly and does not face any problems while running its operations.
