4 SEPT 2018

8 Common Legal Mistakes of Business Startups

For new entrepreneurs, working with a limited budget means cutting corners until the business is up and running.

It's hard to know exactly what's important and what is optional. Legal fees can add up, so startup business owners often make cuts to legal assistance. Here are the 8 common legal mistakes of startups.

1. Delaying Solving Legal Problems

If a legal problem surfaces, don’t let it fester. Thinking any legal problems can be solved later is the first mistake. A legal problem is like a toothache. If you go to the dentist when it first bothers you, it can be fixed quickly and easily. If you let it fester, it only gets worse. It will need a specialized professional to fix, can cause serious damage, and will be extremely costly to take care of. In fact, it’s worse than a toothache because a serious legal problem can mean prison. Legal problems don’t get better by ignoring them.

2. Avoiding Legal Professionals

Though legal fees add up, avoiding legal professionals is not the answer. Not seeking professional help will cost you time and money in the long run. Business law is complicated. Lawyers study for years to understand how it works. There is no way that you, as a business owner, can handle legal matters alone. Though you may not have money to retain a team of lawyers for your small business, every business should include professional legal services as part of the business plan.

3. Using Generic Legal Templates

In the age of the internet, we turn to the World Wide Web whenever we need something. Unfortunately, not everything on the internet can be trusted. Recycling legal documents from the internet is not a good idea because legal matters are serious and business law is different from country to country. For example, legal documents applicable in Malaysia are not usable in Singapore. For businesses in Malaysia, you need Malaysian documents, and even more specifically, you need to know which jurisdiction (Peninsular Malaysia, Sabah or Sarawak) your documents should cater to.

4. Being Too Relaxed with Legal Paperwork

If everything needs to be proper, legal, and country specific, does that mean it’s just too hard? Should you just skip legal paperwork all together? No.

Business documentation is not optional. Having correct legal paperwork is mandatory. Either you will build a legal framework for your business or you will leave yourself open to failure. Not using contract templates in favor of your company is a huge mistake.

5. Falling Down on Employment Paperwork

Lacking in proper employment documentation is another way startup businesses shoot themselves in the foot. Employment contracts protect the employee and the employer at the same time. If an employee gets hurt on the job, quits without notice, or does something illegal using your business’s name, having a proper employment contract means that your business will not be liable.

6. Not Protecting Intellectual Property

As the founder of the business, your vision is crucial. Not protecting your valuable ideas is a mistake. Without legal documentation about your ideas, they can be stolen and copied by a competitor, neighbor, or even an employee. Get your ideas down on paper and make sure they are protected by legal documentation.

7. Not Getting Procedure Down in Writing

You tell your staff to show up for work at 8:00 a.m. but one cashier comes late every day. When you talk discipline, he says he wasn’t sure what the starting time was. He is lying, but if you fire him, it will be the employee who is favored by a judge because you have no proof of your business procedures. Leaving rules undocumented means they are non-existent in the eyes of the law. Write everything down and make an employee handbook.

8. Side-Stepping a Founders Agreement

Starting a business is from the heart. Co-founders are often close friends. We all know the saying though: Don’t mix business and pleasure. Even lifelong friendships have been known to break under the stress of a business venture. Whether your business involves friends or family, not having a co-founders agreement in place is an easily avoidable mistake. Get the details of ownership, job titles, and business shares all down in writing. A proper document will end arguments before they even start.

From handbooks to agreements, there is a huge range of legal documents that are essential in the startup world. So if you can’t afford a lawyer but aren’t supposed to use generic legal documentation, what can you do?

The perfect middle ground is to use legal documentation services. ShakeUp! provides legal templates for businesses in Malaysia so that they can have documentation without the sky-high costs. Everything in the document library is prepared by professionals and can be easily drafted depending on the business scenario. Subscription services that include legal document review ensures that your documents comply with the law and meets your specific circumstances. It’s easy, affordable, and will give you peace of mind knowing that your startup legal paperwork is taken care of.

Sign up for a trial subscription and start drafting legal documents for your startup absolutely free

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