When you decide to start up a
company it can be very exciting yet exhausting at the same time. You are filled with joy but at the same time you can’t wait to get everything started and
going as well. Throughout the process there are some things that you may
accidentally forget or even do by mistake. Some of the most common mistakes
startups make are often the ones that they end up regretting down the line.
1)
Failing To Incorporate
Some startups need to incorporate.
Not choosing the right corporate structure, or failing to choose one at all, could
put the company’s officers at risk. This is especially important if the startup
is going to be doing business in a high-risk industry like the medical
industry.
2)
Incorporating Too Early
Some companies don’t need a
corporate structure when they are first beginning. However, being new to the
business world it is easy for one to think that they do and the consequences of
incorporating to early are usually very severe.
3)
Failing To Copyright Material
A company that publishes information
of any kind should copyright everything it produces. Copyright protection
ensures that no other individual or business may use the material in any form
without the expressed written consent of the business. However, when first
entering the business world many business owners have copyright out of their
minds. They never think that it is something that they need yet as time goes on
it is something that they wish they would have invested a little bit of time
into.
4)
Failing To Use Trademarks
When a business creates a unique
logo or slogan, it’s a good idea to trademark it. This is especially true if
the company plans on growing in size. The time to file a trademark is before
any legal battles begin, not after they’ve started.
5)
Failing To Use Patents
When a company invents something,
it’s a good idea to patent it. It’s not always obvious, but that invention may
later lead to other inventions that depend on the first invention. If no
patents are filed on the first invention, then there’s no protection for the
company. Anyone could run off and say it is there invention and then all of
your hard work has basically been thrown down the drain.
6)
Advertising To Investors
Startups are generally prohibited
from soliciting investors. The SEC prohibits solicitation to investors unless
there is a “substantial and pre-existing relationship” between the company and
the prospective investor. While it’s tempting to advertise for startup capital
to make business operations run more smoothly, this is not the way to go about
it.
7)
Forming a 50-50 Partnership
Partnerships sometimes seem like a
good idea at first. However, a 50-50 partnership can make it harder to conduct
business in the long run. If the partners cannot agree on the direction of the
business, or they end up not seeing eye to eye on an issue, it can prevent the
business from functioning. Because each partner owns half of the business,
nothing can be accomplished.
8.
Not Using Contracts For Business
It’s understandable that a startup
would conduct business using “handshakes.” However, this is a bad habit.
Contracts clarify what services and products will be provided to customers.
They also make it clear what each officer in the company, and every employee,
is and isn’t responsible for. Not to mention the fact that if for some reason
your partner wants to file a lawsuit against you for something that was clearly
stated in the beginning a contract is the only thing that is going to help you
win your case.
Overall, these are the eight major
mistakes that businesses make in the beginning but there are others. These
eight are mentioned because they usually carry the most serious consequences.
Just be sure that when you are getting ready to become a business owner you
double check everything and know the laws. The process may not go as fast as
you expected but in the end it is always better to be safe than to be sorry.
I have written this purposely to provide friendly explanations of
major areas of law and also help friends who are small business owners to understand business
law.
"welcome for more clarification"
By Mengi @2012
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