The entrepreneurial spirit burns bright in many, but the journey from passionate idea to thriving business can be fraught with challenges and legal hurdles. Startups—even those brimming with enthusiasm—can overlook crucial legal considerations, leading to costly mistakes down the road. From business creation to contract preparation and the hiring process, business owners must focus their attention on several crucial business and employment law matters to ensure their business is set up for success.
Stumbling at the Starting Line: The Start-Up Foundation
During a startup’s early days, there is often a whirlwind of activity, and certain aspects or legal considerations may unintentionally be pushed to the back burner. Below are some common mistakes startups make and tips on how to avoid them.
Failing to Choose the Right Business Structure
Before entering into business, entrepreneurs must carefully consider their options and business goals when planning their business structure. It is important to be aware of and weigh your options regarding sole proprietorship, partnership, or incorporation, as choosing the wrong business structure can have significant tax and liability implications. An experienced business lawyer can advise on the most suitable structure considering your specific business goals and risk tolerance.
Operating Without Adequate Agreements
Startup founders and partners often have a verbal understanding of ownership percentages and roles. However, as the business grows, these ambiguities can lead to conflict. Comprehensive founder agreements outline each party’s rights and responsibilities and specify possible consequences for failing to adhere to these requirements. As such, it is crucial for entrepreneurs to work with a skilled business lawyer who can help them prepare ironclad shareholder agreements or partnership agreements that mitigate conflict and outline dispute resolution processes.
Inadequate Financial Preparation
It is not uncommon for new entrepreneurs to fail to adequately plan the finances and resources required for their business. If the amount of capital or resources a business will need to get off the ground is underestimated, this can result in serious consequences, such as not having sufficient financing to achieve the business’ goals as it tries to gain traction. To avoid such issues, it is crucial to thoroughly prepare financial projections for a new business for the first 12 months, as this can assist with securing necessary financing and investments.
Not Seeking Outside Help
New entrepreneurs are often reluctant to admit they need help or seek assistance from appropriate professionals. It is important to draw upon your network or hire a legal, financial, or other business professional to help you navigate any hurdles or challenges. Moreover, seeking proactive help can be beneficial in identifying and mitigating risk and liability rather than having to take corrective action later.
Failing to Comply With Legal and Financial Obligations
Employment laws govern minimum wage, overtime pay, and termination procedures. Non-compliance can lead to hefty fines and lawsuits. Business lawyers can ensure your startup adheres to all relevant labour laws. It is also crucial to ensure business owners maintain ongoing compliance with the requirements of their business structure (for example, holding annual meetings and satisfying the accompanying notice requirements).
Ignoring Learning Opportunities
In a business’ early days, it is crucial for business owners to take advantage of any learning opportunity. Being able to identify a misstep and make appropriate changes to help guide future success is crucial for any start-up. It is important to remember many entrepreneurs are not immediately successful, but by studying what went wrong and making necessary improvements, businesses are able to grow and thrive.
Failing to Consider Employment Law Matters
When it comes to decisions regarding hiring employees or contractors, it is important to carefully consider the needs and goals of the startup, such as the level of control the worker will have, who will own the work completed by the worker, and the nature of the working relationship. After this decision has been made, various employment laws will need to be followed as you build out your team. Moreover, it is crucial to ensure the business has sound employment contracts in place that a skilled employment lawyer has prepared to avoid common mistakes, such as misclassification. Finally, it is important to carefully consider your workplace and privacy policies, including a Disability Accommodation policy, a Workplace Harassment Policy, and a Workplace Violence Policy.
Contact the Employment Lawyers at Willis Business Law for Assistance With Workplace Restructuring and Reorganization
At Willis Business Law, our skilled business and employment lawyers draw upon their extensive experience to help business owners and new entrepreneurs effortlessly navigate new business considerations, such as securing financing, preparing employment agreements, identifying appropriate business structures, and ensuring ongoing legal compliance with provincial and federal business and employment laws. We help startup founders proactively identify and mitigate risk in order to allow them to focus on business growth and success. To speak with a member of our team regarding your new business, contact us online or call us at 519-945-5470.
