While you've likely spent months refining your product, devising a marketing plan, and securing initial capital, it's essential not to overlook the critical legal considerations that start-up companies face.
Agreements With Your Partners:Even if you're not ready to incorporate your business formally, a straightforward written contract that covers essential aspects can save you time, money, and potential distractions down the road. Moreover, the law already imposes a fiduciary duty on partners toward each other, even without a contract. This duty entails 'utmost good faith and fair dealing,' a higher standard than what typical business relationships adhere to. A written agreement clarifies the scope of these duties and addresses issues such as intellectual property ownership, business entity management, and handling departures from the business.
Your Corporate Form:Creating a formal business entity, whether an LLC or an S Corporation, isn't mandatory when starting a business. However, as an entrepreneur, safeguarding your personal assets from business-related liabilities is crucial.
Avoid Employee Compensation Mistakes: Things like deferring compensation and hiring independent contractors instead of W2 employees may seem like a cashflow benefit, but if not done properly can carry serious legal risks under the Massachusetts wage and hour laws.
Your Business Contracts: While not every interaction requires a formal contract, key relationships with vendors, customers, or clients should have documented terms. These agreements need not be overly complex, but clarity regarding important business terms from the outset is vital. When creating contracts, avoid the temptation to download generic templates from the internet, as they may include irrelevant or confusing terms.
​ Learn more about common legal issues for startup companies by visiting us at Legal Issues for New Companies in Massachusetts.