Entrepreneurs embarking on the launch of a startup often face an uphill battle, leaving very little room for error. Their financial situation generally dictates that startups adopt an "all hands on deck" approach that requires everyone to wear multiple hats in order to stretch very limited resources far enough to cover all of the essentials. This can create an exciting yet stressful atmosphere that can help unite an emerging company as they attempt to take on the business world.
While a situation where people have to take on unfamiliar challenges is a great professional litmus test, there are some areas where even the slightest mistakes can really cost you. The legal and regulatory realm is one of those areas. Here are a few reasons placing your business in the hands of a seasoned professional can pay enormous dividends.
Forming a brand new business entity can be much more complicated than it sounds. Knowing the pros and cons of establishing your startup as a corporation or LLC and how to divide and structure ownership of the company can be as critical to achieving your corporate goals as the quality of your business plan. Furthermore, establishing a sound strategy for setting up and running the company early on can be extremely beneficial in the event relationships sour and an owner decides to leave.
They say money makes the world go round, and in the startup world cash flow can often make or break your business. This is why many startups seek capital from outside investors, which can take place over several funding rounds. Savvy investors will research a startup before any funding is committed and this will include reviewing any incorporating documents, vendor contracts, regulatory filings, etc.
Failing to provide sufficient background information, or producing contracts and agreements that have poor terms or were badly negotiated, can project a lack of sophistication that may prevent you from closing investment deals and cut your startup off from much needed capital. Bringing in an experienced lawyer to navigate investor relations will help keep your business’s image professional and improve your chances of securing funding.
3. New Employees
Once you're successful enough to begin expanding, your startup will run into a whole new set of regulations that come with hiring employees. A good lawyer will advise you on your hiring options, draft sound employee and vendor contracts, and help you remain in compliance with the law.
4. Trusted Advisor
Having a legal professional on your team means your startup has an advisor that can spot potential legal potholes and help you steer clear of any landmines. This can protect your business from fines and litigation fees as well as save you countless headaches.
The sheer volume of laws and regulations that may apply to your business dealings can be intimidating, and deciphering the legal terminology even more so. Whether the language is intentionally confusing or it is simply poorly written, these rules still apply to your startup and any misinterpretation can come back to haunt you.
These risks make it vital to draft contracts and agreements that comply with all relevant statutes and protect your business interests. Choosing a reputable law firm to draft all of the commercial contracts you may need, including service and consulting agreements as well as new employee contracts, is of the utmost importance.