RISE Presentation Recap: Startup Business Law Strategies
This was my third year to deliver a business law presentation with the RISE Entrepreneurship Conference, which was held from May 13 - 17, 2013. I’m pleased to say that this conference continues to outperform each year. My presentation this year focused on startup business law principles and guidance to prevent startups from making early-stage mistakes. Below, I’ve highlighted a few of the topics we covered:
Correct Order of Operations. Understandably, many startups and entrepreneurs initiate legal and business processes in the wrong order, and may have unrealistic expectations about the amount of time that various legal and business processes require. This happens most often when a startup attempts to self-direct its business strategy, rather than seeking advice from a lawyer, CPA, and other knowledgeable advisors. The saying “penny wise and pound foolish” certainly holds true in the business startup world. Getting the order of operations wrong or making other early stage mistakes will often cost you more to correct than getting it done properly in the beginning.
Due Diligence Before You Commit. “Never assume” should be the mantra of every business startup. Unfortunately, many entrepreneurs and startups skip over investigative due diligence processes when launching their businesses, specifically when it comes to researching the background and risk profile of the individuals and businesses that the startup will work with. Startups often fail to properly determine whether the business partners and employees are subject to Texas non-compete agreements, which leaves the company vulnerable to disputes and litigation. Similarly, many companies may fail to fully investigate the matrix of fine print attached to the documents they sign. For example, many tech startups often overlook the fine print of API licensing agreements, which may limit or completely restrict the startup from using the platform in the way that the startup wants to use it.
Understanding Employees, Independent Contractors, and Intellectual Property. A fundamental legal concept that every business must understand is knowing how to tell the difference between employees and independent contractors, otherwise, you may find yourself in trouble with the IRS due to worker misclassification. Understanding the difference between employees and independent contractors is also important when it comes to intellectual property because the use and development of intellectual property requires different treatment for employees and independent contractors. If a business does not properly address this issue, it might lose certain intellectual property rights, or might never even obtain the intellectual property rights that the startup thought it had.
Create Valuable Contracts. In terms of enforceability, some business contracts aren’t worth the paper they’re printed on. Further, too many contracts are signed, put into a drawer, and forgotten about until later when a problem emerges. Your contracts should be structured to reflect the processes and needs that are specific to your business, and should form a functional tool to actively manage your relationships and profitability – forms that you’ve downloaded online won’t cut it.
As always, attendees at the RISE Conference raised many good questions which helped to drive the conversation and added depth to the issues we discussed. If you missed it this year, make sure that the RISE Conference is on your calendar for 2014.
Disclaimer: This article is not legal advice and does not create an attorney client relationship. To reach the attorney responsible for this article please contact James Blake, The Blake Law Firm PLLC, 9442 N. Capital of Texas Hwy, Arboretum Plaza One Ste 500-181, Austin, Texas 78759. (512) 651-3930.
