June 1, 2024

Top Legal Concerns for Startups

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Starting a new business can be an exciting time, but there are several legal pitfalls that founders can easily fall into if they aren’t cautious.

Many law firms and other companies offer legal services for startup founders. Still, it’s smart to have a strong grasp of the typical legal concerns startup founders face so you can be ready to launch your business without a hassle.

Here’s our guide of the most common legal concerns for startups.

Operating Agreement and Other Foundational Documents

One of the most common ways startup founders land in trouble happens at the very beginning: with the basic foundational documents of the company.

These include documents like your business constitution, articles of incorporation, and operating agreement, which we expand on in this blog post.

A strong operating agreement details how your business will make important everyday decisions, and how conflicts in the decision-making process are addressed. 

Your articles of incorporation, on the other hand, describe how your company will be organized and managed financially.

The constitution, in short, includes language like articles, bylaws, and resolutions that lay out a company mission statement and other essential operating rules.

These foundational documents range from big picture ideas, like determining what kind of company you want to be, but also specifics, such as a process for handling disputes. It’s important to have solid, detailed foundational documents as your business grows.

Business Address

Though seemingly simple, it’s important to choose a legal business address that also makes sense for your business needs.

It’s important to know that you cannot use a PO box as a business address — it has to be a valid street address.

For founders who expect to lease or buy a physical office space, choosing a business address is straightforward.

Smaller startups or home businesses, however, have other factors to consider.

It is possible to use your home address as your business address, but this isn’t always advisable. Many states require one’s business address to be listed in public filings, which opens one up to privacy concerns. And if you use your home address as your business address, your home may not be considered a personal asset if you run into liability issues.

This requirement can also be tricky if you live outside the US and don’t have a US address. To address this, we recommend Firstbase Mailroom. With this service, we’ll provide you with a virtual address so that you can manage all of your incoming documents online — all for just $35 per month.

Registered Agent

As a business’s legal point of contact, registered agents play an essential role in ensuring a business stays compliant.

Important legal or regulatory documents from the government are delivered to registered agents, rather than to the business address.

Different states have different rules as to who can be a registered agent, but it is required for all businesses to have one in each state in which they operate.

For the most streamlined and easy-to-you use experience, we recommend Firstbase Agent, which tops our list of the 5 Best Registered Agent Services of 2024.

Intellectual Property

When starting a company, it is critical to take steps to protect your intellectual property including patents, trademarks, copyrights, and other assets.

Trademarks provide legal recourse if another company tries to sell their goods or services using the same mark as your business. These can be costly to obtain, but Firstbase users can receive up to $5,000 off trademarks through our partnership with Communer.

While trademarks protect you and your business, it’s also important to make sure you’re not infringing on someone else’s trademark when you’re choosing the name of a product or service. If your business is based on a new technology or innovation, you’ll want to seek a patent to protect your interests. Refer to the U.S. Patent and Trademark Office database to search existing patents and trademarks; and if you want to know if your company name is taken yet, refer to Firstbase’s free Business Name Search tool.

Employment Law Compliance

Before you start hiring and paying employees, you need a strong grasp of hiring laws and regulations in the state(s) your business operates in.

These include anti-discrimination laws, employee classification (full-time, part-time, independent contractor, etc.), and the employee benefits those who they hire will be entitled to.

In most cases, founders will also need to register with the state Department of Labor to establish payroll tax registration, which is how the government knows the business is following proper tax withholding practices.

Firstbase makes this step easy with Firstbase Payroll, which can handle payroll tax registration in any of the 50 states you operate, and even help you with foreign qualification.

Data Security and Privacy

Regardless of the space your business operates in, customers will want to be sure they can trust you and your company with their valuable data.

And beyond the value of maintaining customer trust, there are also many state and federal data security regulations to follow in order to avoid costly fines.

California, Colorado, Connecticut, Utah and Virginia have some of the most comprehensive consumer protection laws in the country, according to the National Conference of State Legislatures, which is worth noting if you do or plan to do business in those states.

Due to the complexities of data privacy law, we recommend start-up founders work with Termly to stay compliant with the myriad regulations. Firstbase users can get up to 25% off streamlined data privacy and other Termly services.

Final Thoughts

There are many legal services that target start-up founders, with some specializing in particular areas such as employee payroll, patent and trademark applications, or even data privacy.

That’s why Firstbase packages all of those services under one product family, with expert guidance and specialty partners available to help streamline the process for you and your company, leaving you with a better understanding of the legal landscape and more time to focus on your business.

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