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Top 5 Legal Mistakes Startups Make

Top 5 Legal Mistakes Startups Make

Starting a small business isn’t always easy but what is easy is making the wrong decisions at the early stages that can cost you dearly in the future. These are a few easy mistakes to be aware of that can spell disaster for your business down the track.


Mistake No. 1: Reliance on Google

We all know that Web MD is no replacement for a real life doctor, and this translates directly to legal advice. Nevertheless, startup owners are often turning to Google to answer their legal dilemmas and using this information without any real experts backing it up. In this situation the phrase ‘you get what you pay for’ is never truer. If you draft a document yourself and use Google to get it right, there is no way that document is tailored to you or your businesses needs and (when you need it) will probably fold like a house of cards. But you get a trained and certified professional to look everything over, you know it will hold up when you need it to and that you won’t be left out to dry when things go bad.

Family and friends are also a source of information you should be wary of. Nana might make the best strawberry tiramisu in the world but that doesn’t mean she knows anything about NDAs or trade secrets. Take all the advice you’re given by all means but don’t forget a grain of salt. Many legal decisions will impact your startup forever and you should invest in your success to save time, money and stress in the future if things go bad.


Mistake No. 2: Lack of Protection

Brand protection is one of those areas that avoidable errors are often made. These kinds of oversights can undermine the sustainability of a business and make it hard to grow with the looming vulnerability over its head. Protecting a brands intellectual property is extremely important, as it can be one of its most valuable as well as profitable assets.

These kinds of issues include:

  • Not registering trade marks for design and patents properly (or at all)
  • Not securing trade secrets with NDAs (non-disclosure agreements)


Mistake No. 3: Trademark Infringement

Maybe the easiest and perhaps the most expensive mistake a startup can make is no being aware of trademarks that may have been awarded to other businesses. When starting a new business your first priority must be making sure you have the right to create and do what you plan to, this could spell disaster down the track and could leave you open to litigation. As well as the core idea of the business you need to make certain that your logo and company name are available as this could create confusion in the market or even cost you in court.

These types of issues include:

  • Other parties with similar trademarks
  • Similarities with the company name or logo


Mistake No. 4: Business Structure

Structure is not only important to the operation of your business but also to its protection. Many internal disputes arise because of improper structuring from the beginning. Structure also guides the goals and objectives over time as the objectives of a sole trader may be different from a larger company.

Deciding on a structure means making an informed decision about where you see the business in the future and who you want to be involved in it.

Example mistakes include

  • Partnership over Sole-Trader
  • Stock/Equity Split negotiations


Mistake No. 5: The fine print

Although we are all familiar with the implications of “terms and conditions apply” we may have no idea what the implications of them could be. And you may run into issues with these conditions in the future if you are not wary of them.

This can affect a business in two ways; one is not reading or being aware of the conditions of documents that you sign. And the other is not building in enough conditions on documents you ask others to sign. Well-written and clear conditions will help protect your business in the future and should be looked over by a lawyer. A small investment now could save you tenfold in the future.

These kinds of issues can include:

  • Contracts of any kind
  • Orders
  • NDAs