Common Legal Mistakes Business Make – Series Part 2

Part 2 of a 2 part series

Here are a few additional legal mistakes that businesses make. Make sure you aren’t costing yourself in the long run and avoid these.

6.  Non-Compete Agreements

Non-compete agreements are enforceable in Texas if they are reasonable.  This means you must review the terms of any non-compete agreements your employees, independent contractors and you have signed.

7.  Employee and Independent Contractor Agreements

Employee and independent contractor agreements are often vague or non-existent.  You need to create agreements with clear terms so former employees and independent contractors cannot leave and start their own businesses competing against you or take work product with them that they developed while working for your business.  You also want to be sure employees and independent contractors treat trade secrets concerning your business, such as pricing, client lists, data, know-how, product specifications, business plans and marketing plans, as confidential.

8.  Intellectual Property

Just because you don’t have a patent doesn’t mean your business doesn’t have intellectual property that needs to be protected.  Intellectual property includes any work that is the result of creativity, including inventions, discoveries, know-how, or processes.  Many times the profitable verticals of a business evolve.  Ownership of intellectual property in a relatively insignificant area may be critical for future success. Be sure employees and independent contractors assign new technologies or processes to you.  Properly register your trademarks and license software to others.

9.  Vendor and Customer Agreements

You must have written customer and supplier agreements spelling out each party’s obligations.  There are a number of items that need to be addressed including:  Who are the parties? What goods or services are being provided and when? What is the price? When is payment due?  How is payment being made and where? What are the consequences of non-payment?  What happens when there are changes to the scope of the project?  Are there any contingencies? How are special orders or returns handled?  Are there warranties?  How can the agreement be terminated?  Verbal agreements are virtually impossible to enforce.  People hate surprises.  If you want to be paid, be sure you have a strong customer agreement that addresses how relevant issues concerning your products or services will be resolved.

10.  Litigation

Litigation often results from poor planning, documentation and execution.  Document all transactions with third parties and especially document any disputes.  Often times, litigation is the result of signing a bad contract or not fully understanding what you have signed.  Litigation is very expensive and distracting.  You want to do your best to avoid litigation.  Seek legal advice before making important decisions.

11.  Get Legal Advice!

Wrong decisions or inadequate legal documents can cost you!  Small business owners often have past experience interacting with other professionals and have seen the work they have done for another company.  In an effort to save money, they try to draft documents themselves.  Many times, it will be significantly more expensive for an attorney to go back and fix these documents.  Legal issues not addressed at the start can result in expensive litigation later.  Attorneys can save you significant time, aggravation and money by providing the right advice at the right time.  In addition, hiring an attorney will put you at a significant advantage if you are ever sued.