5 Scary Legal Mistakes Entrepreneurs Make

Hiring employees. Branding a company. Developing a marketing strategy. These are the exciting parts of starting up a business that everybody wants to do. But what about the hairy stuff? The stuff we try to avoid? You have to get around to it eventually, but what direction should you go?

Entrepreneurs are often stopped in their free-flowing track5 SCs when they come upon legal mistakes that they made when starting up their businesses. So how will you avoid making legal mistakes that so many others, just like you, seem to fall into? Be aware of these 5 scary legal mistakes before you find yourself in a bind!

1. Making deals without putting pen to paper.
   Casual, free-flowing, handshake deals seem great at first. But they often lead to outcomes that do not go according to plan. Be sure to put your business deals in writing every time. Without putting deals in writing, entrepreneurs and clients may not know what to expect from one another. Keep a written document for every relationship that your business enters into. This will protect you from loss of time, money and of course, potential lawsuits.
    
2. Bringing in partners without bringing in signatures.
   Because many partners tend to be long-time business colleagues, friends or even family, oftentimes, partnership agreements get lost in the mix during the chaos of starting a business. Take a look at The Social Network (movie) for example. A shaky partnership can turn sour very quickly. No matter how well you get along with your business partners, you need a legally binding agreement just in case. Sign these agreements early (just in case the relationship takes a turn for the worse in the future). Put in writing issues like who owns what, who has what power and what to do in case of buyout.
    
3. Making a partnership without the correct numbers.
   According to Entrepreneur Magazine, a 50-50 partnership usually does not work. The magazine states that "...when issues arise – like whether to bring on new investors – somebody has to be able to make an executive decision. If you deadlock on a major decision and nobody budges, the company is frozen in limbo unless one of you buys out the other." Even a 51-49 split is a better decision than 50-50.
    
4. Filing a trademark without the research.
   One way to take 18 steps backwards when starting up a business is by filing a trademark without doing heavy research beforehand. If you invest in a brand and then learn that someone else came up with it first, you could lose a lot of money. Do research with the Patent and Trademark Office, in business directors, on domain-companies and the Canadian Intellectual Property office. It's also important to look at that state level, since each has its own registry.
    
5. Choosing a business structure without knowing what you're talking about.
   Sure, LLC and Inc. may look good at the end of your business name, but do you know what the difference between the two is? It is important to do your research before you determine your business's structure. You can choose sole proprietorship, S-Corp or limited liability company—but which one is for you? Many business professionals recommend incorporation in most cases. Incorporations show customers, banks and investors that you're serious about being in business for the long haul.