Many people dream of being their own boss, and they can get very exciting when they believe they have finally found a way to implement their idea and present their product or service to the world. This is especially true if the business has a good chance of bringing in some quick revenue and profits. While enthusiasm is great, it can be detrimental if it causes an entrepreneur to miss important legal considerations in their business. These could potentially put a damper on the business’s ability to profit or even their ability to stay afloat. Here are 3 legal mistakes that a new business needs to avoid as the start their venture.
Failing to Set Up a Solid Business Plan and Structure
There are some situations in life where “winging it” is a sufficient strategy to get through a situation. Starting a business is not one of these situations. There are many issues that need to be resolved long before the “grand opening.” Some things that need to be decided include the type of legal business structure; sole proprietorship, limited liability company (LLC), cooperative, corporation, partnership, or an S Corporation.
A new business should put together a basic business plan that addresses the goals of the business, how they plan to achieve them, and who they will ask to help them get there. With a basic structure in mind, the budding business should meet with an attorney who can help them decide what type of structure is most appropriate considering the nature of the business and its goals. Part of the plan should include securing the physical and intellectual property of the business by obtaining necessary patents, trademarks, or copyrights to prevent the stealing of ideas from competitors or even employees.
Failing to Set Up a Solid Human Resource Policy
When a new business owner or manager puts together their initial team, it is easy to be overly optimistic and enthusiastic about the business’s potential. They are ready to hit the ground running and give it their best effort. Not every employee they hire is going to feel the same way, however.
Generally speaking, employees need a certain amount of rules and structure to understand what is expected of them. The relationship between the employer and employee goes beyond the paycheck. Insurance policies need to be set up in case of injury. Tax preparations need to be made. A code of conduct needs to be established as well, which may include things like a dress code, or a specific policy regarding personal Internet use at work. These policies may result in some proactive actions such as blocking certain websites and monitoring web usage.
Mishandling the Competition
If an idea for a business is truly good, that business is bound to bash heads from time with their competitors. Many new business owners will look directly to their competition and be quick to point out their faults. It’s the “grown up” business version of “we rule, you drool.” With social media front and center, this is an easy mistake to make.
But honestly speaking, it is rare that the competition is actually “bad.” Few are putting out an inferior product or providing a substandard service. If you imply that this is the case, you or your company may wind up with a case of libel or slander to deal with if you aren’t careful. Not only are you faced with legal fees that would be better spent on your business, but your reputation can also be damaged at the same time.
A better strategy is to stay focused on what you do and to provide the best product or service you can. Respect your competition, look at what they are doing right and consider it as your business strategy evolves — stopping short, of course, of stepping on their intellectual property rights. You can coexist with your competitors. In most cases, the town is big enough for the both of you.