Legal Mistakes That Tech Startups Must Avoid

It's never been a more exciting time to be involved in the tech world. If you have a unique idea and an entrepreneurial bent, you don't have to work for someone else and develop it under their name. You can go into business for yourself as a startup.

Of course, founding and running a startup involves a lot more than late nights with your small team, break-time ping-pong matches and craft beer Fridays. There's a great deal of work involved and a lot of room for error, especially if you don't have a lot of experience in the business world.

Here are some of the most glaring mistakes that many tech startups make – and that you should avoid:

• Not clearing things up with your partners. Maybe startups are founded following a series of informal meetings. This is where problems start to arise. You may be building your company with friends, or with people who have certain areas of expertise you need. Regardless, it's crucial to sign agreements that clearly dictate everyone's responsibilities and ownership percentages. 
• Disorganized employee paperwork. Hiring? That's a good sign! But you can't just shake your new employee's hand and call that a contract. Be sure to issue the proper employee documentation that establishes whether he or she is an "at-will" employee and what their total compensation will look like.
• Failing to understand securities laws. At first, your initial investors will likely be friends and family. But just because you know them personally doesn't mean that the law doesn't apply. As pointed out in a recent Forbes article, if you sell shares of your new company you still need to comply with all disclosure and filing laws. 

Are you looking to start your own business in Arizona? The Law Offices of Donald W. Hudspeth, P.C., have years worth of experience guiding entrepreneurs through the formation of new businesses. Call us today to learn more.

Categorised in: Starting a Business in Arizona

This post was written by