Business Law & Compliance
Common growing business legal mistakes and how to avoid them
5 min read
02 August 2016
If you ask any entrepreneur, they will tell you that starting a business from the ground up is one of the most fulfilling and rewarding experiences anyone can have; the joy of creating something and seeing it flourish is truly special. However, getting to that point isn't the easiest thing to do.
Indeed, starting a business and maintaining any level of success can be fraught with various problems, and the most popular among them is legal issues.
Many growing business make the same legal mistakes, so I’ve pointed out the most common mistakes and detailed how to avoid them.
Getting caught out by technicalities
The excitement of forming your own business can often lead many businessmen and businesswomen to forget the basic corporate and legal formalities. No one enjoys doing admin, but if you don’t you could land yourself in hot water.
Things such as meeting minutes, stock ledgers, filling and licence renewal are mundane I know, but they are also incredibly important and can make or break your business. The best way to avoid this is to create an extensive and in-depth business calendar to keep track of important times and dates.
Not being upfront with co-founders/investors
No one likes to talk about money; everybody knows that, but when running a business, you need to be prepared to pretty much exclusively talk about money. Bringing up the subject to co-founders and investors can be tough, but avoiding it will lead to lawsuits.
Make sure you have a meeting once, or even twice a month, to meet with the investors and discuss where the company is, how much money you’re making/losing and what to do in the next month to make it better. This leads to harmony and everyone being on the same page.
Continue on the next page for the three remaining mistakes that founders make, including not planning an exit strategy.
Intellectual property is an asset to growing businesses, and while it needs to be protected, it should also be approached with caution. The finance and maintenance of trademarking can overwhelm any company on top of causing an abundance of legal issues.
Intellectual property is incredibly important, so make sure that you don’t go overboard, yet still protect your brand. Do as much research as possible and only trademark when the company can handle it and the brand is definite.
Not hiring accountants or lawyers
You might be surprised to hear this, but the amount of growing business that leave it too late to hire accountants and lawyers is staggering. Don’t wait until you are getting sued to have a lawyer, and don’t wait until you receive a letter from the tax man to hire an accountant.
They both can prevent those legal issues from happening as well as help you get out of trouble if it occurs, so hiring a lawyer and an accountant is incredibly crucial to avoiding risks to your business.
No exit strategy
It may seem a little strange to think too much about the worst case scenario on the day your dream of starting a business comes true, but you’d be wise to think of what you will do if it all goes wrong.
The business world is a world that constantly changes, everything from the market to personal relationships changing overnight can be the difference between success and failure, so having a plan in place is the best way to avoid the pain of losing your business. Work with your lawyer to ensure that you have an easy route to exit if needs be.
I hope this article went a long way to highlighting some of the common legal mistakes that you might make while living your dream of starting your own business. Make sure take on all of the methods of avoidance to stop your business from turning into a nightmare.
Joan Herbert is assistant manager at Bank-Opening-Times.co.uk
Building on this, read on as four entrepreneurs share their lessons on how to avoid making rookie mistakes.