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2 Hidden Legal Traps Can Stop An Infant Business In Its Tracks

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2 HIDDEN LEGAL TRAPS

Can Stop An Infant Business In Its Tracks

When an entrepreneur starts a new business, that business is his or her baby in every since of the word. During this infancy phase, a few of the entrepreneur’s greatest challenges center on risk. You will find numerous legal risks that are hiding in the shadows and appear like magic in your business. If you are not careful, your business is dead on arrival. The tough part is you almost never see them coming. If you are a first time entrepreneur, understanding legal risks is especially troubling since you are not familiar with all of the problems that are poised to strike your business.

Lets shine the light on two of these sneaky devils. Remember, that I don’t know your specific business situation(s) and you should seek the advice of a lawyer.

1. Relying on Handshake Deals – During the infancy stage of the business, you are going to be tempted to cut corners and not document all of your “new business” with written contracts. This could be a huge mistake. You need help desperately but do not have any money to pay so you offer them equity in your company or a percentage of sales. You have a personal relationship with the person so you really you do not need to draft an agreement. Everything will be fine. It is rare for a deal like this to work out and when it does fall apart it is going to be your word against theirs. Find an attorney that works with entrepreneurs and let them help you document these relationships appropriately to avoid this trap. The investment will pay huge dividends in the future.

2. Unconsciously Building Your Business on Someone Else’s Brand – An excited entrepreneur opens a new business positive that this new idea will change the face of the planet. So, they do their due and search through pages of Bing, Yahoo and Google results and determine that their brand-new idea does not exist. Now they start pumping in cash because it is obviously the best investment ever. Years later when you have are making money hand over fist, you receive a letter from your friendly neighborhood lawyer with the headline, Cease and Desist. Usually, these letters come from companies on the top of the food chain and they read something like this: This letter can serve as notice from XYZ Corporation that you are infringing on our copyrights, trademarks or patents and that must cease and desist from any and all use. The next phase is going to be lawsuit should you fail to comply.

On the positive side, this letter gives your fledgling business a chance to stop the offending conduct before you get sued. The bad news is that they may still sue you for damages.

To address this risk you need to have a legal pro on your team that can conduct comprehensive searches before you start using a particular logo, process, or brand name.

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Reib Law

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Email. scottr@reiblaw.com