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Protect your business: Learn about common legal issues

On Behalf of | Aug 6, 2017 | blog |

Does your business have a strong legal foundation? This is an important question to ask when you are starting your company. As a founder, you should have a good understanding of the legal issues you may face in order to protect your business.

Business formation

Entity formation plays a significant role in your company’s ability to shield against lawsuits and financial problems in the future. Liability issues arise when you enter agreements with third parties, a standard business practice that is vital to the success of your company. The right type of business entity can protect your personal assets from these liabilities.

Which business entity is right for you? A corporation may be the best option for companies with venture capitalists. An LLC, limited liability corporation, is often better suited for businesses with a small number of owners. However, every company should discuss their specific goals and business plans with their lawyer to determine which entity formation is right for you.

Equity ownership in the company

Your company should have clear documentation for equity ownership. When determining equity ownership between founders, consider each founder’s role in the company now and in the foreseeable future.

You should also consider including a vesting clause. Vesting is beneficial for companies because it allows owners to earn equity in the company over time or based on their performance. Vesting also protects business founders if a partnership ends.

Your company should consider all of your options when determining equity ownership and be diligent in your documentation to ensure all parties understand their roles and responsibilities in the company.

Understanding employment laws in New York

All founders should understand state and federal labor laws. This will ensure your company will be able to comply with these laws and reduce the risk of a lawsuit by employees. Your lawyer should provide guidance on how labor laws will impact your business, including how to comply with current wage and hour laws and how to correctly classify employees and independent contractors.

Your company should consider requiring all employees and contractors to sign a non-disclosure agreement and proprietary rights agreement upon hire. This will help protect your company and make sure all intellectual property developed by employees will be belong to your company and not the employee if they leave.

The right legal representation can make all the difference when forming your business. Our attorneys at R3M Law Moser, LLP represent entrepreneurs and business owners in New York City in a full-range of legal issues, including business formation and planning.