You’ve lived in the same house for three years. It’s been great. You’ve been comfortable, nothing has gone wrong, and you envision thriving there for years to come.
But what if you knew your house was situated on a minefield? Would you get help? Or would you assume that because nothing had gone wrong, nothing ever would?
There’s all sorts of advice out there—good and bad—bombarding entrepreneurs. And they have plenty on their plates already. But one of the biggest mistakes entrepreneurs can make is to postpone or forego seeking legal advice.
Some assume they’ll be fine; others are intimidated by the potential price tag. But the long-term risk dwarfs any short-term gain. There are so many potential landmines out there, and what entrepreneurs are gambling can be far greater than they may imagine.
So let’s start with the risks, then follow up with some simple—and affordable—ways entrepreneurs can protect themselves and their innovations.
Risking It All
Most entrepreneurs don’t realize that if something goes wrong and they don’t have the proper legal protections, they could lose their ideas, their innovations, their profits—even their homes, retirement savings, or other personal assets. It only takes one lawsuit, one mistake—intentional or not—to harm your brand, tarnish your image, or potentially destroy what you’ve worked so hard to build.
If you have an idea that you’re going to put all your time and effort into pursuing, the one thing you absolutely should do is try to protect it.
Building on Secure Ground
When should you seek out legal help, and what basic help do you actually need?
Obviously, you won’t call up a lawyer every time you doodle a business idea on a napkin. The time to do so is when things start getting serious and you move toward taking external steps: consider setting up a business entity, talk to a bank about a loan or consult a vendor to see if your idea would actually work.
Just a couple of steps can set up a business on a solid legal footing.
First of all, make sure you form the right type of business entity—partnership, corporation or LLC, just to name a few—which can provide the correct level of protection from liability. Your choice depends on the purpose of your business, its financial needs, and the ability or desire to grow. And you’ll want to talk to an accountant about the tax implications of each option.
Secondly, a simple nondisclosure or confidentiality agreement drafted specifically for your company offers protection when you present your idea to a potential investor, partner or vendor. Just one unprotected conversation leaves open the door for someone to take that idea as his own.
If you’re worried about unpredictable hourly rates, ask an attorney to provide a quote for a flat fee.
Looking to the Future
As your venture grows, you may need help with things like a lease review, client or vendor contracts, or a master services agreement. Or you may need to seek out specialized services for a patent, trademark or copyright.
Small business owners can sign unwise contracts without negotiating simply because they’re so eager to do business or because they think they have no room to negotiate. That’s not true. In contract negotiations, you always can ask for things. You may not always get them, but you never know until you ask.
Complications also come into play if you have a handshake agreement with a vendor or client, then realize that the two of you have very different recollections of the specifics. Without anything in writing, there’s no way to know.
So take a little advice from people familiar with both sides of legal agreements: Don’t build your business on a minefield.
Seek basic legal help up front—before things get explosive.