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Common Legal Mistakes By Startups

Start-ups are new ideas which are prone to misguidance. Here are some important points which should be kept in mind to avoid legal mistakes:

  • Legal form to operate the business:
According to the nature of business and certain assessment of risk management it is very important to decide on what type of legal form of the business will be effective as well as cost friendly to the organization.  It is important to consult a lawyer so that it can help the business in incurring minimum taxes and liabilities can be avoided at the earliest.
  • Dealing with the co-founders:
Pre-nuptial agreements are the new way to deal with founder’s agreements. There can be various points on which one should be based on: percentage of company, roles, responsibilities, ownership subject to vesting based on participation, time commitments, salaries, key decisions, impeachment by board, contribution, deciding sale of the business, liabilities, expectations, goals, vision of the company, etc.

  • Employment Documentation:
Running a company without employees is not possible. It is important for companies to accommodate their employees and at the same time regulate them so that they are efficiency borne to the company. A company should come clear on issues like Employee Handbooks, Confidential information and inventions assignment agreements, employment offer letters of various types, stock option documents, verification forms, benefit forms, etc.

  • Standard form of contract to deal with Clients:

Consultation with business lawyer can make sure that contracts are drafted well and understood in the most unambiguous way. The language should be clear and always in company’s favour so that whenever some negotiation is needed it can be welcomed. Clauses which are important to the contract should be mentioned so that it can be referred in case any dispute arises. Some important clauses include that of price, dispute, force majeure (in case of occurrence of any unforeseen event), liability, representations and warranties, etc.

  • Intellectual Property Protection:
From company’s name to its new patents, copyrights, designs, trademarks everything has to be dealt by an experienced intellectual property lawyer for the start-up so that liabilities of the entity can be minimalized and at the same time properly dealt with in case of any dispute arises. Important matters which should be taken care of include Service marks, trade secrets and confidentiality agreements (for both the third party and the company’s employees).

  • Taxation:
Taxation is very important for the country’s revenue making and it can cause a serious problem for the start-up if not taken seriously. Choosing a particular type of legal form for your business helps you in tax savings as well as it gives the company a sound reputation. In India taxation is divided into two main heads: Direct taxation and Indirect Taxation. Lawyers with tax expertise should be consulted before any investment so that maximum tax savings can be done.

  • Internet policies to protect your company:
Terms of use agreements and Privacy Policy have to be prepared so that your content can be protected and liabilities can be minimized at the same time. Disclaimers are a very important part of your policies because it can prevent your company from subsequent consequences. An expert corporate lawyer should be consulted for the preparation of these agreements.

  • Compliance with securities law:
In India, Securities Exchange Board of India is the regulator when a company wants to sell shares. Failure to comply with the requirements can result in significant financial penalties. Experienced Lawyers can make this process very smooth and easily approachable for a company.

  • Need for a Counsel:
A company without a legal counsel is vulnerable. A lawyer’s duty is to protect the company’s interest to its maximum utility and create minimum liability for their work regime. Always look for experts in the field because a start-up was brought with ideas that are best in their fields and such interests should be protected.



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LawRato's mission is to make legal experience remarkable by educating people on legal matters and provide advice on the same. LawRato.com is an interactive online platform that makes it faster and easier to find and hire the best Lawyers in any city / court in India, because you deserve access to first-rate, professional legal advice from the best Lawyers out there.
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