Incorporation, Intellectual Property, Outside Counsel, Start Ups, Trademarks

Common Legal Issues Young Businesses Encounter—and How to Deal with Them

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The launch phase of a new business is an exciting time, but with it comes a whole slew of legal requirements that many young companies fail to address up front. As a result, many newer business owners suddenly find themselves in something akin to a legal minefield, where one misstep could destabilize the business in its infancy. The good news is that by being aware of the most common issues, you can take steps proactively to avoid them. To that end, let’s look at a few of the most common legal challenges you might face as a young business—and then we’ll talk about how to deal with these potential problems most effectively.

Licensing Requirements

Many business types require some sort of licensing with local and/or state authorities—for example, businesses that offer healthcare, serve liquor, or perform automotive services all must meet certain local requirements for permitting and licensing. Once licensing is in place, those licenses must also be maintained and renewed at the proper intervals. If you find yourself operating without the proper licensing, it can result in fines, penalties, and even forced closure of your business. Moreover, it can also lead to reputational damage, making it harder for your business to regain credibility and trust.

Trademarks and Intellectual Property

Intellectual property issues can fall into two categories: having your own IP violated or inadvertently infringing on someone else’s IP. Many companies they fail to timely protect their own IP by registering the appropriate trademarks, patents, and copyrights. Or they invest lots of money into their registered name, logo, product designs, and other creative works without realizing that a similar company had a similar name, design, or branding idea. If you don’t do your due diligence on either of these fronts, you could find yourself without legal recourse if someone infringes on your branding—or worse, you could find yourself sued for infringing on someone else’s branding.

Compliance with Employment Law

As your business grows, you will need to hire employees, at which point you’ll be expected to comply with the Fair Labor Standards Act (FLSA) and relevant state and local labor laws. This includes understanding fair hiring practices, wage and hour regulations, employee benefits, tax withholding, and more. These regulations can be quite complicated depending on the type of business and where it’s located. Neglecting to comply with employment law can lead to fines, costly legal battles, and harm to your company’s reputation.

Contractual Disputes

Contracts are a necessary part of running a business. You need to have strong contracts in place for many, if not most, of your business relationships, including employees, partners, investors, vendors, and customers. Many startups try to lean on so-called “boilerplate” contracts to cover these bases, but these contracts can’t effectively cover every type of business equally—and in fact, they rarely protect any business effectively. Vague or poorly written contracts won’t protect your business interests and enforce your legal rights. When disputes arise (notice we said when, not if), you could be facing costly and distracting litigation when you should be focused on building your company.

Taxes and Accounting

Tax laws and regulations can be confusing, especially for startups. When businesses gain traction and start growing rapidly, their accounting may become a primary area of vulnerability simply because they have trouble keeping track of everything. This can lead to issues with late or missed filings, insufficient employee withholding, underpaid estimated taxes, penalties, fees, and more. On top of that, young businesses frequently struggle with record keeping and compliance because they lack a basic understanding of the right accounting practices.

Getting Ahead of the Problem: The Launch Package

Fortunately, the best solution to deal with and/or avoid all of these legal issues is the same. The key is to get ahead of the issues by involving general counsel before problems arise. Getting legal help is often one of the last thing startup owners think about—but it should actually be one of the first. Of course, the dilemma is how to afford legal services with limited capital.

To address this dilemma, Hood Venture Counsel has designed the Launch Package specifically to make legal services accessible to young, growing businesses. This package includes a complimentary legal consultation and the creation of a business roadmap, plus 10 hours a month of legal counsel to cover everything from licensing and compliance to trademark registration, drafting contractual agreements, and more. Let us help set your business up for success. Contact us here to learn more about how the Launch Package can give you the legal coverage you need to ensure unimpaired growth.

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