1–5: Legal Structure and Forming a Business
Selecting the Best Entity Type
Obstacle: Making a decision to form an LLC, corporation, or partnership.
Solution: Review your goals, liability concerns, and tax implications first with an attorney before selecting any structure.
Undefined Ownership Contracts
Obstacle: Founding team disagreements regarding roles or percentages of equity owned.
Solution: Create a specific co-founder or shareholder agreement shortly after founding your business.
Read Also:
- https://insightfullawhelp.com/20-corporate-law-questions-startups-frequently-ask/
- https://insightfullawhelp.com/30-corporate-governance-questions-answered-for-entrepreneurs/
- https://insightfullawhelp.com/40-key-corporate-law-questions-every-business-owner-should-understand/
Ensuring Proper Incorporation
Obstacle: The failure to ensure all necessary forms or permits.
Solution: Comply with the registration process in your jurisdiction and seek a lawyer to ensure compliance.
Poor Bylaws or Operating Agreements
Problem: Operational disputes due to vague rules.
Solution: Draft comprehensive bylaws or operating agreements which outline governance procedures.
Compliance with Local, State, and Federal Laws
Problem: Overlooking specific regulatory requirements.
Solution: Conduct proper research or seek a compliance expert to ensure compliance.
6–10: Corporate Governance
Conflicts Between Directors or Shareholders
Problem: Decision-making gridlocks or disagreements.
Solution: Add dispute resolution provisions to corporate documents.
Failure to Maintain Corporate Formalities
Problem: Failure to maintain formalities results in a loss of liability protection.
Solution: Conduct regular meetings, take minutes, and follow the correct procedures.
Poor Delegation of Authority
Problem: No clear authority for major decisions.
Solution: Clarify roles and responsibilities in your governance structure.
No Succession Plan
Problem: No clear answer if a key leader leaves.
Solution: Develop a formal succession plan to ensure continuity.
Too Few Risk Management Policies
Challenge: Inadequate exposure to risks in terms of litigation, as well as financial liabilities.
Solution: Develop a risk management framework and review it periodically.
Policy and Procedures
11–15: Intellectual Property
Unregistered Intellectual Property (IP)
Problem: Loss of rights in inventions, trademarks, or copyrights.
Solution: Register IP with appropriate authorities and register contracts securing ownership.
Competitors’ Infringement of IP
Problem: Others using your intellectual property without permission.
Solution: Monitor their usage and litigate if necessary.
Poor NDAs
Problem: Employees or partners disclosing trade secrets.
Solution: Utilize enforceable non-disclosure agreements for sensitive information.
Unclear IP Ownership in Contracts
Challenge: Who owns work created by contractors or employees.
Solution: Clearly outline IP ownership in employment and contractor agreements.
Global IP Issues
Challenge: Protecting IP in foreign jurisdictions.
Solution: Utilize international IP protections, such as WIPO, for trademarks and patents.
16–20: Employment and Labor Issues
Misclassification of Workers
Challenge: Treating employees as contractors.
Solution: Comply with legal standards for classification to avoid penalties.
Poor Employment Contracts
Challenge: Disputes over terms of employment.
Solution: Draw up full employment contracts setting out roles, remuneration, and conditions.
Violations of Employment Laws
Challenge: Non-compliance with labor standards.
Solution: Update on labor laws and have the HR staff undergo training.
Discrimination and Harassment Claims
Challenge: Litigation or reputation damage at the workplace.
Solution: Draw up anti-discrimination policies and provide employee training.
Failure to Protect Confidential Information
Challenge: Leak of confidential business information.
Solution: Utilize non-compete and confidentiality agreements.
21–25: Contracts and Funding
Dullly drawn up contracts
Challenge: Litigation caused by ambiguous contract terms.
Solution: Hire a qualified attorney to prepare and analyze contracts.
Contract Breach
Challenge: Failing to live up to promised terms.
Solution: Specify and include clear dispute resolution and penalties clauses.
Violations of Securities Laws
Challenge: Raising capital without the proper regulatory requirements.
Solution: Ensure that fundraising is done under the proper securities laws of either the SEC or local jurisdictions.
Investor Conflicts
Challenge: Disagreements over how decisions are to be made or returns.
Solution: Specify investor rights and obligations in the funding agreement.
Handling Debt and Equity Appropriately
Problem: Inadequate management of funds instruments.
Answer: Maintain up-to-date accounting and seek experts in finance as well as laws.