Even the soundest business plan can ultimately fall when the paperwork was not done properly or someone put something in the small print that went unnoticed. Further, without a proper plan for when things start to go south, a dwindling attempt at a project can suddenly become a legal nightmare. Don’t wait for when things go wrong. Be sure to take measures to avoid pitfalls for small business while you’re still writing up the paperwork.
Use Direct Language
Never leave things up to chance when it comes to legally binding documents. Even when doing business with your spouse, everything should be spelled out clearly. At the end of the day, this approach only benefits everything involved rather than puts anyone in an awkward position, even though it feels awkward at the time. The documents should reflect each person’s role, time, effort, and financial commitment. Additionally, these documents should cover how shares will be relinquished by owners should more capital come in and how ownership will be distributed should a partner leave the company.
While these conversations can be unnerving, it is far better to discuss these items before any agreement is signed rather than arguing over the details once someone wants out of the company. Further, this approach gives a better plan for the partners entering the agreement. Rather than leaving things up to seeing how they work out, this creates an easy to follow list of expectations for everyone involved.
Protect Intellectual Property
When you go into business, everything goes from being one person’s idea to “our idea.” However, legally, the idea belongs to one person. Further, it is important to ensure anything created by employees while working for the company stays as the company’s property. This means creating confidentiality agreements, invention assignment agreements, trademark registration for company logos, copyright notices on all written material, along with other safeguards for trade secrets such as safes and locked doors.
Keep Business Outside the Courtroom
Adding an arbitration clause in all contracts can go a long way. This means if there is ever a legal issue in business, all efforts will be exhausted before entering court. Of course, there are times when a court room is not avoidable. That being said, avoiding the financial and time cost of litigation can be major, especially for a small business. This opens the door to handling situations in the company or simply using lawyers rather than going through with arbitration.
The most important thing is to have everything in writing whether it is a shareholder meeting or a formal event. It also pays to have a lawyer on your side at the beginning. Contact our team today to find out how we can new budding companies with their legal documents.
