Legal matters may be daunting for the inexperienced, but that's no excuse for failing to make sure your venture is on the right side of the law, warns Rocket Lawyer founder Charley Moore.
Entrepreneurs may have to wear many hats, but there's one area that can be particularly daunting to the inexperienced—the law. Even those who feel comfortable playing the role of newbie manager and DIY PR person may feel more than a little overwhelmed when it comes time to enter the jargon-filled, formal, and outsider-unfriendly realm of legal matters.
The genius of our American system is the protections that we afford to people who start businesses, everything from limited liability if you incorporate to bankruptcy if you fail so you can dust yourself off and start over again. That is really core to what has driven growth in the American economy, and you're nuts as a person going into business to operate outside of that amazing legal system that, with a little bit of work, you can put on your side and make a competitive advantage.
Just sticking with the easy route of operating as a sole proprietor and relying on agreements you've rigged up with a bit of glue may sound tempting, especially when your business is small and your schedule is insane, but Moore feels this is one of entrepreneurs' most common mistakes.
"The thing that folks mess up the most on is operating as a sole proprietorship," he says. "When you're a sole proprietor, in terms of your business, you're outside of the legal system, so you're not taking advantage of those wonderful rights and American corporate law." Instead, Moore urges owners of new ventures to take a careful look at their businesses and make a thoughtful legal plan, offering his company's free legal check up as a good place to get started.
"There's no set of things that's 'one size fits all' in the law," Moore says, "so it's really identifying what kind of business you are and then starting to put a legal plan together. For example, are you a services business? In that case, what sort of services are you going to perform and what are the risks? Am I selling products, in which case I may have product liability issues? Am I a reseller? What sort of resale agreements should I have?"
Breaking your inertia and getting started may be the most pressing challenge, but Moore stresses that tending to legal matters as your business grows and changes is also essential, offering seven rules to "bulletproof" your business:
JESSICA STILLMAN is a freelance writer based in London with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist. @EntryLevelRebel