Launching a new business can be very exciting. Done right, it can also be extremely lucrative. Nonetheless, starting a company and making all of the right moves is by no means easy.
Sometimes, entrepreneurs can get carried away in the moment and forget to take legal precautions. Here are a couple of legal mistakes that startups need to avoid.
Choosing the wrong name
Branding is everything in business, and the company name is a fundamental component of that. Not only do you have to get the name right (for example, by making it memorable and fitting to the business), but there are legal considerations. What if you choose a name that’s already in use? This could cause you serious legal issues before you’ve even started.
Before deciding on a name, it’s important to conduct due diligence. For starters, you can do an online search to check for companies with similar names. Then, just to be safe, you can conduct a trademark search on the U.S. Patent and Trademark Office (USPTO) website.
Failing to choose the appropriate structure
Another aspect that all startups should consider is the legal structure of the business. If you’ve decided to set up a small side business on your own, then a sole proprietorship may suffice. This means you can start doing business almost immediately using your own personal bank accounts. The downside of this is that you could be personally liable for any legal claims against the business.
If you have the perfect business partner, then you may want to establish a formal partnership. You need to make sure that you and your partner are more than just good friends. Your professional skills should complement one another.
If you’re aiming a little bigger than this, then you may want to establish a corporation. This will shield you from personal liability, but there are many things to consider, such as tax implications.
One of the best ways to avoid these mistakes is to have sound legal guidance behind you at each stage of your business journey.