Turning an idea into a successful business isn’t easy, but you can keep your journey on track by avoiding these top five legal pitfalls.
The name and branding behind an idea can be as important as the idea itself. However, using a name before thoroughly confirming its availability can have fatal consequences.
Because serial entrepreneurs generally move fast, they often fall victim to this fact pattern: You have the perfect idea, the right business plan and the right team to push the product into the market. The excitement begins and you build out a webpage, search engine optimization and manufacture and package the product or service for sale.
Will the members or managers be subject to a non-compete clause during or after their time with the company?Many startups fail because the founders cannot resolve disputes amicably. Most startups are formed as LLCs or corporations to protect the founders from the company’s debts and lawsuits. However, if the founders commingle funds, they may lose this liability protection through what is known as “piercing the corporate veil.” If the corporate veil is pierced because the founders treated the company’s money as their own, their personal assets may be reached to satisfy debts of the company.
Unfortunately, most startups do not realize the risk of online contracts until it is too late. Online contracts often result in disputes or lawsuits that could have been easily avoided if the company set aside time and money at the outset to properly draft their agreements. Securities laws operate to protect investors and prevent fraud. While the legal requirements of securities laws are complicated, both federal and state law require a company selling a security to register that security with the SEC or the state, unless an exemption to registration is available. Most exemptions require the company to undertake certain actions or refrain from certain other actions, as well as impose significant limitations on how you can sell and who you can sell to.
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