As a business attorney, I talk to all kinds of entrepreneurs about both their passions and their struggles. Going out on your own to pursue your passion is scary stuff. So here are five legal tips that will help every entrepreneur spend more time pursuing their passion and less time worrying.
1. Surround yourself with the right people. A business owner must have a relationship with certain key advisors: your business banker, your accountant, and your business attorney. But you should also surround yourself with like-minded people who have achieved what you’re trying to achieve. These are the people you will turn to for advice and referrals.
2. A business plan isn’t optional. “If you fail to plan, you are planning to fail.” Running a business is just too complicated to keep it all in your head. A business plan isn’t just about convincing a bank to loan your business money or convincing investors to invest in your dream. It’s your roadmap—how will you go from passionate idea to wild success?
3. Always plan ahead. All too often, business owners are so busy dealing with today’s problems that they can’t find the time to think and plan ahead. When it comes to legal matters, entrepreneurs often wait until the last minute to get their business attorney involved. Contrary to popular belief, this won’t save you money in the end. By keeping your business attorney informed, they can point out potential red flags and spot concerning issues before you get too far down the wrong path.
4. Verbal or handshake agreements are costly disputes waiting to happen. If words are powerful, the written word is especially so. Every time I deal with a dispute over a client’s verbal or even poorly written agreement, the two sides each have a completely different view of what the terms were that they thought they had agreed to or what was meant by those terms. These misunderstandings can be avoided by simply putting the agreement in writing in a way that is clear and unambiguous.
Be especially careful about mixing friends and family with your business. The very nature of these relationships creates a greater potential for business disputes and misunderstandings. If you want to preserve your relationships, put the business agreement in writing.
5. Pick your battles. Litigation is expensive. It is always cheaper to avoid a dispute in the first place, than to fight and win later in court. And even if you “win,” there is a huge difference between winning and collecting a judgment. If a business dispute cannot be resolved short of litigation, then make sure to keep the end-goal in mind. Litigation takes time and energy away from running your business. What are you really trying to recover and how will each aspect of litigation get your business there? Nothing will rack up legal fees faster than simply wanting to prove how right you were and how wrong the other guy was.
