Top 10 Things To Consider For Small Business Owners and Startups

A startup business can be challenging, especially if you don’t have any experience running one. Just when you think you’ve got everything figured out, something else comes up that you need to handle—and figure out how to handle it legally. If you want to avoid legal snafus and grow your business successfully, here are 10 important legal tips to consider as a small business owner or startup.

1) Protect your idea

It may seem obvious, but one of your primary tasks as a business owner is to protect your idea. This can mean patenting or trademarking it or simply keeping it close to your vest. You want to make sure no one steals your idea before you get a chance to capitalize on it. That said, you may want to consider setting up a system that keeps others in the dark about what you’re doing.

legal tips for small business owners and startups

Tip: When others ask how things are going, deflect questions by saying something vague like great or OK. It’s easier than giving out an explanation without getting too much information out at once. If they press you further, say you’re worried someone will steal your idea and that’s why you don’t want to talk about it. They’ll get the hint.

2) Get it in writing

The first tip of any legal advice is to get everything in writing. If you’re working with a customer, make sure to set expectations in writing. Now, if you’re entering into a partnership or acquiring another company, have your contracts reviewed by a lawyer before signing. If you’re hiring new employees, make sure everyone knows their responsibilities. It can also be worth getting agreements with vendors, contractors, or other people that you regularly do business with, in writing as well.

3) Create an NDA

You don’t want to tell everyone your idea! You need a nondisclosure agreement, or NDA. An NDA protects you by legally forbidding others from talking about or using your ideas without your permission. To create an NDA, write down what information you will be sharing with others. Then, identify who you will be sharing it with.

legal tip for startups and small businesses nda

4) Protect your IP

One of your top priorities as a business owner should be protecting your intellectual property, including patents, trademarks, copyrights, trade secrets, and more. Patents protect inventions that can be used in new products or processes. On the flip side, trademarks are used to identify goods or services with a common name. Service marks have been around even longer than trademarks but refer to a particular service performed by an individual or company.

Copyrights are protected through registrations filed with federal government agencies. Now, trade secrets can be protected through contracts with employees who sign non-disclosure agreements as well as through building trust within your community. When starting a new business it’s important to get legal advice early on. That way, you understand how to best protect your assets from competitors looking to take advantage of what you’ve created.

5) Consider employee agreements

If you’re starting a business with one or more partners, consider signing an employee agreement. It’s an enforceable contract between you and your partner(s) that outlines how compensation is shared, who owns what, and how disputes will be resolved. This can be especially helpful if it’s a side gig. If something goes wrong with one business, you don’t want it spilling over into your freelance writing career. For example, Apple co-founder Steve Wozniak tried to sue Apple back in 1983. After he felt he was unfairly compensated by his former employer. Thankfully he didn’t go through with it because his founders’ agreement with Steve Jobs already outlined how they were supposed to split equity in their new company.

6) Know when to lawyer up

You may be able to handle certain legal matters on your own, but it’s always wise to seek legal advice when you need expert help. (For example, if you have a high-stakes contract dispute with an investor.) Don’t know where to start? Ask a colleague, coworker, or mentor—or Google around. You should also research which lawyers are best in your area of law. Often, general counsel at startups can provide good insights into finding a lawyer who specializes in startup matters. Once you have some names in mind, talk to these folks and other entrepreneurs about their experiences before making your decision. Make sure they have expertise in your industry as well as startup law.

7) Don’t forget about patents

While it may not be a good idea to sit down with your patent attorney before you’ve done any research into your product. It’s never too early to put together a preliminary patent search on, just in case. If you’re able to spot weaknesses in your competition’s patents, they could save you a lot of time and money down the road. And while we’ve been discussing trademarks so far, don’t forget about patents (which protect inventions). Without patents, other companies will have free reign to use your invention without having to pay royalties. The U.S. Patent and Trademark Office offers free resources that can help explain what is patentable, along with which types of inventions are popular among startups.

8) Consider cost-benefit analysis when hiring a lawyer

A cost-benefit analysis is a great way to decide whether you really need an attorney, or if it would be cheaper to take matters into your own hands. For example, if you’re starting a business in which licensing fees might be required, consider whether it would make more sense to pay a lawyer or simply acquire what’s needed yourself. In some instances, doing research on your own might lead to better results than hiring an attorney could. Also, remember that simply getting advice from an attorney doesn’t mean that he or she has to be on retainer. Free consultations are available at most firms.

9) Educate yourself before you hire anyone

If you’re looking to hire a lawyer or consulting firm, it can be tempting to pick up whatever business card looks best at first glance. However, that could end up being a costly mistake if you don’t take the time to educate yourself about what to look for. Just as there are scams in every industry, legal services scams are not unheard of either. If you’re looking for legal advice from someone who’s not a professional legal counselor or registered attorney, be sure to make educated decisions based on your research. Remember that even lawyers sometimes have bad days or face unexpected issues. It’s always smart to give them a call and make sure they’re real professionals before handing over any cash!

10) Work with Accountants/Lawyers that Understand Your Needs

While it’s important to work with accountants/lawyers, make sure they understand your needs as a small business owner. While their job is not to give you legal or financial advice, if they understand your business, you’ll probably get more value out of your meetings. If you are looking to do business in other states or countries, be sure that all of your lawyers are licensed in those states/countries too. They will know what documents (like articles of incorporation) need to be filed where and can help point out legal issues that could arise from expanding. If you’re planning on filing patents or trademarks make sure that your lawyer knows about these things so that he/she can help ensure that everything is done properly the first time around!

The Bottom Line

It’s important to follow these 10 legal tips for small businesses and startups, at the bare minimum. Hiring a lawyer is one of those necessary but often scary costs associated with launching your business. It’s important to understand what you are signing up for. And it’s even more important to understand that most small businesses don’t have lawyers on retainer. Before hiring an attorney, ask yourself: Do I really need a lawyer? Can I handle these issues myself? If so, do some research online or at your local library. You may find that you can take care of everything without ever setting foot in an office (or spending any money). If you decide to hire an attorney, make sure he or she is willing to work within your budget.

Legal Favor
Legal Favor

Senior Editor


Contact Us

"*" indicates required fields

Full Name*
This field is for validation purposes and should be left unchanged.

Legal Favor's mission is to provide legal information to the masses. Our dedicated team of experts is always looking for new ways to deliver insights in bite-sized and easily digestible chunks. With multiple experts on staff, you'll be stress-free knowing you can have access to some of the best educational legal information, news, and updates. Keep in mind, our articles are not legal advice whatsoever, and it's always a smart idea to consult with an experienced attorney for any legal issues.

Contact Us

"*" indicates required fields

Full Name*
This field is for validation purposes and should be left unchanged.