Legal Traps for the Unwary Entrepreneur, Part Two
Posted by Michelle Grenier on Fri, Oct 01, 2010 @ 02:50 PM
This is Part Two of the series, Legal Traps for Business Startups to Avoid. Previous and subsequent articles in this series can be found at this Entrepreneurs' Blog page.
These helpful tips relate to issues commonly faced by entrepreneurs and means for dealing with them through proper prioritization.
No. 6: Failing to properly evaluate significance of prior agreements.
Prior employment agreements and other professional relationship agreements of founders and employee candidates, should be reviewed by a competent business lawyer for legal issues. For example, if a founder or employee of the new business is working for or previously worked for a business in the same or related industry, it is likely that such person will be prohibited from or at least limited in his/her involvement with new business. Non-compete, assignment of developments and trade secret clauses are often a part of such agreements.
Simply taking steps in preparation of operating the new business (e.g., creating the new entity), could trigger legal action. Employers are increasingly utilizing employment agreements for a broad scope of their employees. If a founder or employee is bound to the terms of such an agreement, there may be prohibitive or limiting terms that would be applicable to the new business. In addition, even if no written agreement was signed, use or disclosing the trade secrets of the former employer will likely be prohibited.
If a founder or employee is bound by an assignment of developments clause set forth in a prior agreement, unless proper steps are taken, the party benefiting from the assignment may own all developments created by a founder or employee even if such are developed for the new business.
The moral of this story is, review of prior agreements of the persons connected to the new venture is essential; the consequences of failing to do so, could bring down your business before you open the doors for business. Don’t take a chance, have your agreements reviewed by a competent business lawyer.
No. 7: Failing to properly weigh and consider costs of taking preventative measures now versus costs of taking remedial measures later.
Some entrepreneurs believe that they need to raise money first and then hire a lawyer. This article (and Part One, etc), presents issues that, if not properly and timely managed, may not be remedied later or may be remedied at substantial cost later.
The point is not to encourage you to stop your startup momentum and focus your efforts on legal and tax issues. Instead, the point is, to gather your team of professionals, legal and tax, to clear the way, so that you can continue your startup momentum.
Moral of this story is, (a) do it right from the outset with proper professional guidance; the alternative could result in the demise of your business and exposure to personal liability; and (b) take preventative measures now, rather than more costly remedial measures later.
Coming Soon: Legal Traps for Startups to Avoid, Part Three.
Click here if you would like to schedule a consultation with an experienced business lawyer.
Common key words/misspellings: Business Law, Business Lawyer, Boston Business Lawyer, Bosotn Business Lawyer, Boston Business Laywer, Boston businsee laweyr, Maine Business Lawyer, Boston Business Attorney, Maine Business Attorney, Corporate Lawyer, Startup Lawyer, Startup Advice, Startup Mistakes, Entrepreneur Advice, Entrepreneur Lawyer
When you are ready to discuss the legal issues associated with your business, click here to contact Michelle L. Grenier, Esq.
Copyright (c) 2011-2012 Michelle L. Grenier, Esq. All rights reserved.