In the early days of a new small business start-up, entrepreneurs will be busier than they ever have been before. When it comes to developing, building up and managing your start-up, there are so many different considerations and concerns on the individual entrepreneur’s mind.

All too often, all these obligations, concerns and other thoughts distract the entrepreneur from the important legal aspects of their new start-up. With an ever-growing list of things to do, entrepreneurs can overlook these legal elements, and this can cause a lot of trouble further down the line.

Attention to a few legal issues when you are creating your business can make a huge difference and prevent you from falling victim to legal problems which can be expensive and devastating. When a problem arises, it could be too late to do anything about it.

We are going to go over 5 of the most common legal mistakes which can deal a devastating blow to new start-ups.

Choosing the Wrong Business Structure

This is the most common mistake entrepreneurs make when it comes to legally registering their business: choosing the wrong structure. Depending on where you are in the world, these business structures can vary in name but, more often than not, they are largely similar.

In most cases, the available business structures include sole proprietorships; partnerships; limited companies or limited liability corporations (public or private); and corporations. Choosing to register yourself as a corporation over an LLC or an LLC over a sole proprietorship can have serious legal repercussions if it is the wrong choice. What you register your start-up as will determine which taxes you pay, how much tax you pay and what your personal liability for your start-up is, amongst other things.

Each of these business structures has their own benefits and drawbacks. Before you register your start-up, you should research them individually and decide which one is best for your business. It may also help to discuss this with a legal expert or an accountant, as these people will have dealt with similar situations.

Not Protecting Intellectual Property

Your start-up’s intellectual property is a valuable asset and is what makes your company unique. Unfortunately, lots of start-up entrepreneurs neglect to get the necessary protection for their intellectual property until it becomes too late and is stolen. Whether your intellectual property is your logo, a product design, trade secrets or any other intangible asset, they are free to be stolen by competitors if you do not protect them.

Intellectual property protection typically comes under the form of patents, trademarks or copyright. Which one(s) you will need depends entirely on your intellectual property. For example, patents protect new ideas and inventions whereas trademarks protect words or symbols which identify a brand and distinguish it for others (such as ‘Eat Fresh’ or ‘I’m Lovin’ It’.)

Working without Contracts

You should not work with any clients, suppliers or vendors without having a contract in place which dictates the nature of your relationship and each party’s responsibilities. Starting a new business is exciting, and it is far too easy to lose sight of what is important, especially when you have landed a deal with a client you really wanted, but you should not jump into any deal without having a contract in place. Unfortunately, a handshake does not substitute a contract, either.

Contracts protect you and all parties in the deal, so you should not start any work or undertake any obligations without one. You can quite easily develop a few standardized contracts which you can adjust to fit your business; there are lots of them available online. However, we do recommend working with a legal professional to do this for you. By working with a lawyer, you can get a contract drafted up which you can make minor edits to for each client you work with, and then have this re-reviewed by your lawyer.

Relying on the Internet for Legal Queries

Just like Google is no good for diagnosing medical problems, Google is also no good for providing reliable legal advice. It is all too common for start-up entrepreneurs to turn to Google for legal advice, though, because there are lots of message boards out there offering their opinions in the form of advice.

You never know who you are dealing with and you should certainly not take the ‘legal advice’ you read on the internet as gospel and then rely on that commercially. Although Googling legal questions may be free and cheap legal documentation is available online, the advice and work of a lawyer is always your best (and safest) bet. This level of professional advice and documentation is the only thing which is going to protect your start-up.

Ignoring the Fine Print

All of us are guilty of not reading the Terms & Conditions when it comes to signing up for websites and online services, and just ticking the ‘Agree’ box and not thinking twice about it. Who has actually read Facebook’s Terms of Use? I certainly haven’t.

In business, this is not something you can do. As a start-up entrepreneur, you should always read the fine print and find out exactly what you are agreeing to. If you are ever to have a dispute with a client, buyer, distributor or other entity with whom your start-up has a contractual relationship, your signature at the bottom of that contract or those terms and conditions will be what a court of law uses to decide your start-up’s fate or liability.

About the author:

Michael Deane is the Editor of Qeedle, a small business magazine, and has been working as a marketing executive for nearly a decade. He manages teams with great success, aiming to facilitate better conversion rates and return on investment for his clients.