How to Make Sure Your New Business is Legally Secure


In a previous article, we covered ways to save your business before it reaches a critical point. Today, we will be covering how new businesses can build a secure legal foundation to avoid any critical points down the road. We’ll be discussing common areas where new businesses are legally exposed, and how to secure them. Investments in making your business legally secure will benefit a new firm’s sustainability and profitability in the long run.

Having a Founder Agreement

Most startups begin with a group of friends who come up with a novel idea and begin working as business partners. One of the biggest legal mistakes co-founders can make is not having a written agreement on the details of your business relationship. Not doing so can cause legal problems down the road. One example is the history of Facebook’s ownership, which resulted in a complicated legal battle among co-founders. Such legal proceedings are costly, and this can hamper a company’s growth during the early stages.

Separating Personal From Business

Another mistake entrepreneurs make is not separating themselves from their business, which is specifically true for business owners that choose to operate as sole proprietorships. This is problematic because if the business is sued, the owner’s individual assets can be attacked in a court of law. According to Investopedia’s tips to avoid a lawsuit, new business owners should consider legal protection from the start through having a business structure that will protect them. In ZenBusiness’ overview of forming an LLC, they specify that this structure provides limited liability protection to the owners. Legal structures such as corporations and LLCs are ideal in separating personal assets and liabilities from that of the business’.

Hiring Competent Legal Counsel

Once your new business is up and running, there are many instances where legal help will be needed. You will need assistance in establishing trademarks, drafting and editing partnership contracts, and the like. Digital marketing firm Leadnomics learned all too late that hiring an in-house lawyer is the most economical and efficient decision. Instead, they had to shell out costly bills to law firms on a variety of their business matters with poor turnaround time.

Insuring Your Business

Business writer John Boitnott states that from the day an entrepreneur starts a business, he or she is exposing themselves to certain risks. One accident or disaster could wipe out a small business, especially one that is not insured. There is a wide range of business-related insurance that entrepreneurs should review depending on their specific situation. Professional liability insurance would be the most basic. Then you would need property insurance if you own or lease a space, as well as workers’ compensation insurance if you have employees. Even entrepreneurs who begin their small businesses at home should consider getting home-based insurance.

Investing in Cybersecurity

With small online businesses especially vulnerable to cyber attacks, investing in cybersecurity makes a firm more legally secure. Cyber attacks expose a business to many legal risks. The former tech giant Yahoo was under fire after they failed to inform users of a huge data breach. The National Law Review claims that they are the first public company to be fined by the SEC for failing to disclose data breaches. With this kind of a precedent, cybersecurity needs to be considered a priority by businesses to protect them from any legal issues related to data and privacy.


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