As business law attorneys, we know that entrepreneurs and start-ups are in business to make money. To support this goal, they focus (rightly) on maximizing their business model, gaining market share and continuing to innovate. In the midst of achieving those goals, they may not pay attention to the legal issues that could compromise their efforts. This post will focus on five potential mistakes that small businesses can make.
Not having corporate bylaws or a shareholder’s agreement – It’s one thing to have an ingrained small business culture or a unique way of doing things around the office, but not having a shareholder’s agreement or corporate bylaws can be problematic when a business partner leaves or another partner wants the company to grow.
Not having human resource guidelines – Not having a human resources manual to guide employee conduct could be harmful if problems arise. For example, if a person is fired without going through a formal process while another is given several chances to improve, this could lead to a lawsuit.
Disparaging other companies online – Small businesses must be careful about unwittingly walking into defamation suits.
Not protecting sensitive information – Businesses that fail to protect trade secrets or fail to obtain patents or trademarks for other unique pieces of the business are doomed to have problems as they grow.
Using too many outside investors – Indeed, cash is like oxygen. Without it, the business cannot breathe and it dies. However, getting too much cash from outside investors may lead to problems when the investors disagree with how the business is being run.