Did you know that more than 50% of all small businesses fail in the first four years? Sadly, the leading cause of small business failure is incompetence and lack of experience. When starting a business, entrepreneurs need more than just a great idea and hard work. They need a solid legal structure for their new enterprise in order to avoid lengthy legal battles and other pitfalls that could destroy their business ventures.
Legal Documentation is Key to a Startup’s Success
When starting a new business, there are specific legal documents that all businesses need in order to truly succeed.
- Business Formation Documents – all business owners need to determine how they will form and operate their business. The right business formation will offer startups flexibility, while limiting personal liability for company obligations. Owners will need to consider the tax liabilities, benefits and disadvantages to operating as a corporation, an LLC, a partnership or a sole proprietorship. Making the wrong choice could be disastrous consequences for startups.
- Governing Documents – new businesses need to develop operating agreements or bylaws to describe how the business will be managed, the way the profits and losses are to be allocated, and what rights and responsibilities are shared by the various owners, shareholders, and officers.
- Intellectual Property Assignment Agreements – a large portion of startups are founded with a new idea, patent, or design. This intellectual property must be protected and accounted for. Without an intellectual property assignment agreement, the company may not actually own this intellectual property, increasing the likelihood of entering into lengthy disputes and protracted legal battles in the future.
- Nondisclosure Agreements – a nondisclosure agreement protects a startup’s confidential information. This could be a secret recipe or a software design and it prevents that information from being released to competitors or to the general public. Anyone who has access to sensitive or confidential business information should be required to sign a nondisclosure agreement, including employees, vendors, and potential investors.
- Shareholder Agreements – these agreements often include buy-sell clauses that explain what happens when a shareholder decides to leave the company. Oftentimes, original founders must leave the company and move on to other ventures. When this occurs, it is important to have clearly defined rules defining the buying out process.
- Employee Contracts – Florida is an “at-will” state and employees are allowed to leave at any time and without notice. Employees are often critical to the success of a small business and a high turnover rate can spell doom for new startups. Employment contracts ensure that valuable and key members of the business team are under contract. They can also include noncompete agreements, arbitration clauses, and clearly defined benefit packages.
Contact Our Florida Business Attorneys
At the Law Offices of Todd M. Kurland, our Florida business lawyers have extensive experience helping small businesses protect themselves during the initial phases of business development and gain traction in today’s economy. Our law firm services all of South Florida, from Miami to Fort Lauderdale, West Palm Beach to Tampa. Contact us today at (561) 693-4524 for a consultation and review of your case. Your business IS our business.