Eight Common Legal Mistakes That Startup Businesses Make

In some ways, the internet age has made launching a small business easier than ever before. Due in part to the web's opportunities, new small businesses are being created every day, many based on very unique and innovate ideas. Unfortunately, some beginning small business owners lack the experience to avoid certain common legal pitfalls. Unlike large corporations with their immediately available legal advisors, many entrepreneurs rely solely on their own judgment and experience in dealing with legal issues. Avoiding these eight common legal mistakes can help ensure that your venture launches successfully.

1. Not Incorporating Your Business

Many new business owners run their operations as some form of sole proprietorship or partnership. While this can be a convenient strategy early on, incorporating your business creates a protective shield for your personal assets and helps limit your liability risk. If your business is not incorporated, a lawsuit or other business crisis could potentially cause you to lose your personal savings and investments. In addition,

 2. Not Securing Necessary Copyrights

Whether you are launching a brick-and-mortar business or an online business, your name is one of your greatest assets. Secure the rights to your business name, your domain name and any other necessary copyrights immediately; otherwise you run the risk of these names eventually being used by someone else, potentially costing you customers.

3. Not Documenting All Agreements and Terms and Conditions

Not having all business arrangements, terms and conditions and similar agreements documented in writing can potentially have serious consequences. For example, MJ Lehman of Nicky Nicole learned the hard way about the consequences of not fully documenting her business arrangements. A supplier that had verbally agreed to exclusively provide her business with a product later sold that product to many other businesses, leading to a significant financial loss for Nicky Nicole. Not clarifying your website terms and conditions can also be a serious problem, since you might unintentionally give the impression of endorsing all links from your site, potentially opening you up to legal liability down the road. Hire an attorney to help ensure that all of this documentation is complete and binding.

4. Not Creating a Disclaimer of Liability

Similarly, you should create a legal disclaimer of liability that protects you in situations like a customer injuring himself after purchasing one of your products. Your attorney can help create this disclaimer as well.

5. Not Creating a Privacy Policy

Finally, have the lawyer help you create a proper privacy policy. Not having an adequate privacy policy may discourage customers from supporting your business. With today’s many businesses privacy problems, many customers have become very sensitive about this issue. Additionally, many corporate customers require a well-established privacy policy before doing business.

6. Using Unlicensed Content

Not securing the appropriate licenses for the media files, images, audio, graphics and even coding used in your website can potentially leave you vulnerable statutory damages. Unless otherwise specified, all ownership rights for these types of files remain with their creators. Take the time to secure all necessary ownership or usage rights before using them; the consequences for not doing so could be very costly.

7. Infringing on Trademarks

Trademark rights are a similar issue. Promoting your product or website without sufficient research on all the trademarks it contains is extremely risky. The use of trademarks you do not own in meta tags or keywords to drive traffic to your website without permission is also often illegal, so contact the trademark owner if you have any doubt about its permitted use.

8. Using Spam and Illegal Advertising

Finally, be careful that your promotional or advertising activities comply with all relevant laws. It can be particularly easy to make legal mistakes with email advertising campaigns; take the time to ensure that your ads are in compliance with both state and federal laws.

Do your homework

Most of the time the legal mistakes made by new business owners are not intentional, but are simply due to lack of knowledge. Nevertheless, this ignorance can be devastating to a new venture. Thoroughly researching all of the laws and regulations that apply to your business can save you a tremendous amount of hassle and money later on.


This is guest post from Hayley Spencer. Hayley writes for a website that provides consumer friendly explanations of major areas of law and also helps small business owners to understand business law.



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CEO at 3Bug Media
Gary Shouldis is the founder of 3Bug Media, a web marketing company that helps businesses create 360 Marketing Strategies to dominate their market. His blog is read by over 20 thousand small business owners a month and has been featured in the N.Y. Times Small Business, Business Insider and Yahoo Small Business.
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