3 Areas of Law to Consider Before Launching a Startup

Entrepreneurs are typically risk-takers by nature. They have the insight not only to land on a potentially profitable business venture, but also the ability to figure out how to finance the business, court investors if necessary, and build relationships that will become the foundation of the startup business. But many entrepreneurs lack the funds to pay for professional marketing, PR and legal counsel before their startup gets off the ground. Instead, they find themselves struggling to study and master a variety of matters across different disciplines, including law, that could have a major impact on the business down the line. Worse yet, often entrepreneurs choose to simply ignore important issues and hope that nothing bad happens later.

At Brownstein and Nguyen, we understand the importance of protecting your business through careful documentation and properly executed business agreements. Here are three areas of law that entrepreneurs would be wise to familiarize themselves on or seek legal counsel about.

Intellectual Property Rights

Company names, slogans and logos as well as other marketing efforts may all be subject to intellectual property rights violations if you don’t go properly investigate before using them to promote your business. It is wise to perform due diligence before selecting a company or business name, including searching state incorporation records and trade names, local business license registrations, and Google searches for similar-sounding businesses. However, intellectual property rights don’t simply cover trade names, trademarks and logos. They also pertain to potential patents and copyrights that protect inventions and artistic creations which may be involved, directly or indirectly, in your business. Penalties for violations can range from injunctions to monetary penalties, either one of which could unravel your business before it gets off the ground.

Vicarious Liability

Did you know that you and your business could be liable for the actions of your partners, shareholders, company officers and employees? Whether it’s an employee injury or other negligent act while performing a work task, or a business tort other wrongful act or omission of a partner, make sure you’re covered against vicarious liability in unforeseen situations. In many cases, this includes ensuring that you and the business are covered by appropriate insurance against such liabilities. You will also want to ensure that partnership or shareholder contracts and employment agreements contain appropriate indemnification language to protect the business.

Contract Basics

Contracts form the basis of most business relationships, and most business litigation cases involve contract breaches. Business owners must educate themselves on what it takes to create a legally-enforceable contract, or they may find themselves embroiled in a costly legal battle down the line. Both written and oral contracts must:

  1. Reach mutual assent between the parties involved.
  2. Cover all materials and important terms, which must be clearly defined.
  3. Lay out the rights and obligations of the involved parties.
  4. Must not violate public policy.

Typical contracts for startup businesses include partnership or shareholder agreements, real estate leases, vendor and supplier agreements, and employment contracts. In addition to the primary agreement of the parties, many of these contracts also cover confidentiality, payment, default, attorney’s fees clauses and termination. It’s advisable to seek legal counsel when drafting any contract that could have a significant impact on the business.

Do you have a question about a new business venture? Stop problems before they turn into legal disputes. Contact Brownstein & Nguyen for business litigation counsel.