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12 Tips for Avoiding Litigation As a Startup

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Are you planning a startup? Do you know what legal precautions you must take into account?

There are many things to consider when starting a business when it comes to protecting your company. However, the more crucial part of the legal talk is how you should see to it that you are not in offense of anybody or any other company’s rights.

Why should you be mindful of sound legal activity? Litigation can be expensive, complicated, and take a significant amount of your precious time.

Legal action towards your startup can delay your operation or even lead your company to discontinue entirely. Lawsuits filed against you and your company, for something you are not mindful of, can take your hands off your business’s vital areas.

You have to be careful when it comes to your startup’s legality in all aspects, from design to service system.

On the other hand, you might have to engage in litigation as a claimant. You might be running after someone who stole your design, committed a crime that resulted in a loss, or an insurance carrier acting in bad faith.

Whichever side of the blade you are in, it would be best if you do your best to avoid them when it comes to litigation. Who wants problems?

Luckily, there are evasive tactics or tips that you can instill in your startup. Here are TWELVE actionable things that you can do to avoid disputes and litigation when initiating a business.

1. Clarify Your Contracts

At the beginning of the venture, you must see to it that you have prepared the documents that lay out the arrangements between founders, investors, and shareholders. While dependent upon the nature of the entity used to run the enterprise, the vital agreements often contain shareholders’ agreements, subscription arrangements, and details on loan.

How investors or shareholders can exit the business also has to be made clear in the documents, so that you can minimize the chances of a dispute happening in the future.

2. Get Advice

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Before you start, ensure that you obtain legal and accounting advice about the right entity by which you will run your business.

Obtaining financial, taxation, and legal advice might seem unnecessary, but the additional assistance can guide your business into growing in a way that minimizes surprises, troubles, and unwanted liabilities.

3. Legally Secure Your Intellectual Property Position

It is highly imperative that you conduct intellectual property clearance searches.

You have to be able to confirm that you are not going to infringe somebody else’s intellectual property rights when you run your business.

You also have to ensure that you can apply to register your business’ intellectual property rights with no conflicts with another party’s rights, like trademarks and logos.

4. Register Your Trademarks

Register the trademarks that you will use in your business. Give early thought to these matters and obtain registrations to cut down the possibility of another business trading off your name and reputation.

5. Write Roles in Contracts

Your employees and contractors’ roles must be set out and written in contracts should be entered into.

Your employees and contractors’ contracts must also contain relevant KPI’s and the conditions by which they provide their services. Also, you should document any equity entitlements in the business if there are.

6. Prepare Your Terms and Conditions

Before starting your business, you have a prepared set of written terms and conditions to cover everyday transactions.

Even if you might not be able to apply your terms and conditions on every transaction, a set terms and conditions standard will be useful in laying out important terms like times for payment and others.

With written terms and conditions, you will also have assistance in the recovery of payments from entities owing to your business.

7. Prepare Contingencies

It would be wise if you considered including mandatory dispute resolution provisions as part of significant contracts.

One thing you can include is a dispute resolution clause requiring the involved parties to meet, engage in mandatory mediation, or participate in an expert determination process.

Dispute resolution options in your contracts can save you from the expenses and hassles of litigation. These smart clauses make for quicker or cheaper fixes.

With dispute resolution clauses, your business will have the opportunity to resolve disputes at an early stage and help you avoid having to need the involvement of lawyers and the courts.

8. Document Everything

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It would be significantly smart to document your important meetings and telephone discussions with people and entities that provide or receive vital information and roles with your business.

Prepare written minutes of meetings, record or take file notes of meaningful telephone conversations, confirm oral agreements or other arrangements in writing via email after they occur, or record a video of presentations (your security camera will do).

Your documentation will assist in ensuring there is clarity when it comes to business arrangements. With these records, transactions will less likely be misunderstood by other parties as they can review them any time they want.

The documents will also serve as evidence in your favor if a dispute arises in the future.

9. Fortify the Protection of Your Intellectual Property

Protect your intellectual property ownership. It is crucial that you can retain control of intellectual property that is created by employees and contractors in your business.

See to it that your employment, service, and contractor contracts have sufficient provisions about who owns what. You should have a well-drafted confidentiality agreement for sensitive commercial matters like trade secrets or recipes so that you can retain control of information that is critical to your business.

10. Comply with Government Requirements

Without compliances, the government and your customers will sue you to penalize or even closure. Operating without the proper paperwork is illegal.

Remember that government requirements like fire safety compliance, business license, building safety permits, FDA approvals, agency certificates, and others are not for the government to tax you, but to ensure that your service or product is safe for the public to receive and you are legitimate to do business with.

Without compliances, you are giving your potential customers a disservice – certificates are your proofs of safety. Hence, you have to comply with regulatory matters relating to your business’s nature for your clients’ sake and litigation avoidance.

11. Get the Proper Insurance

Your business is always at risk of physical damage, operational mistakes, financial loss, internal issues, and other unfortunate troubles, which results would be bad for the pocket without insurance. However, getting insurance is not as easy as add to cart and checkout – you have to study your business’ policy with in-depth speculation.

Many insurance companies will play technical games on you – remember that their business model is getting money from people and hoping that they wouldn’t have to return the favor. They might delay your payout or deny you when the time comes that you are claiming for damage.

Ensure that you know what you are getting into – know your contract and understand it thoroughly, making changes with your carrier as you see fit. The best way for you to clarify things efficiently is by hiring an expert insurance attorney who will ensure that you have the right policy.

When the time comes that you have to claim your insurance, an insurance attorney will see to it that your carrier will not delay payment or deny you your money when you are in the clear. You wouldn’t have to go through litigation.

12. Hire a Lawyer

Your business will mature and develop, and as you grow, always remember to seek legal advice on every aspect of your business.

About the Author

Atty.-Bill-Voss_BW-210x210  Attorney Bill Voss is the Founder of The Voss Law Firm, P.C. He has expertise in commercial and business insurance litigation, business claim law, insurance fraud litigation, residential claims, commercial claims, church claims, apartment claims, and other first-party insurance claims.

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