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Avoid These 5 Common Start-up Legal Mistakes

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It seems that everywhere you look, a new start-up is trying to make it big with a game-changing idea. But it’s only the ones that can turn that idea into reality that reach business success. Too many start-ups fail to make the transition from idea to execution or encounter major setbacks along the way. In the midst of developing your growing start-up, don’t make the common mistake of disregarding tedious, but vital tasks such as making sure all your legal, insurance, financial and tax ducks are in a row.

Establishing a solid legal system can help you avoid costly mistakes and save time and stress down the road. Many entrepreneurs struggle with developing such systems because they don’t foresee the most common mistakes start-ups make. Avoiding these only takes a little self-awareness and planning, so read on to learn how to sidestep the five biggest legal mistakes a start-up can make.

  1. Be strategic when creating your entity. Think about your long-term goals, and choose an entity that matches up. Have your eye on major growth and raising capital? Consider a Delaware C-Corporation, which could set you up for venture capital. Looking for tax advantages? Look into the advantages of an S-Corporation structure that will allow you to minimize your payroll taxes by splitting your personal pay between salary and distributions.

And, while you can always convert your entity later on, doing it right the first time will save you time and money. When you talk with a lawyer about the best form of entity, make sure your lawyer doesn’t just suggest a one-size fits all solution, but actually understands the details of your business now and where you want to grow to in the future.

  1. Be clear with co-founders. Don’t wait until your business begins to make a profit to begin discussing what each founder is worth. Confront the elephant in the room (i.e. money and position) and be clear on rights, decision-making authority and equity from the get-go. A well-drafted operating agreement or shareholder agreement is key here. The agreement process itself can surface potential conflicts in advance, and confirm whether you and your co-founders are truly in alignment before big investments of time and money are made.

  1. Protect your intellectual property. It’s essential to establish ironclad protections for the intellectual property that impacts your business’s future value. Think beyond just patents and trademarks; consider having founders, employees and third-party developers sign intellectual property rights agreements so you retain the value they may create while working for you.

  1. Develop a robust set of contract templates. You will thank yourself later for establishing clear guidelines and minimizing your liabilities in writing. Online legal document drafting services are one size fits all; your business will be best served by developing a set of templates that meets your business’s unique needs.

  1. Don’t overlook the importance of working with a lawyer. Working with a trusted lawyer can help you avoid all the mistakes above plus countless others you will likely make as you grow your start-up. A lawyer who also works as a creative, strategic advisor, as we do, will guide you to not just avoid legal mistakes, but set your business up with the right legal, insurance, financial and tax systems for a lifetime of business success.

Just because you’re a start-up doesn’t mean you have to be naive. If you are serious about developing a solid legal foundation for your start-up, begin by sitting down with us. As your Family Business Lawyer®, we can help you identify your liabilities, mitigate any legal risks and get you on the right track for success. This will allow you the freedom and energy to focus on growing your business.

 

Spring Cleaning For Your Legal and Financial Affairs

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Spring has officially sprung and that means it’s spring cleaning time. Shake out the rugs, clean out the cupboards, and get your legal and financial affairs in order.

 

For plenty of folks, it’s easy to know what to do when it comes to home organization, but the idea of legal and financial ordering can be complex and confusing.

 

This article will give you a few places to start:

 

  1. Review Your Beneficiary Designations

Request updated beneficiary designation forms from your life insurance account and retirement account custodians. Look at the form and identify whether you have a minor designated as either a primary or contingent beneficiary. If you do, those assets will be tied up in Court, unnecessarily, and may not be available to the people you’ve named to care for your children.

Consider designating your life insurance and retirement accounts to be distributed to a trust for the benefit of your heirs, providing Court and creditor protection, and ensuring your children do not inherit money before they are properly prepared.

  1. Update Your Family Wealth Inventory

Your Family Wealth Inventory is where we document the assets that you own, so that in the event you become incapacitated or when you die, your family will know how to find what you own.

Without an updated Family Wealth Inventory, your assets could be lost to the state department of unclaimed property. There’s currently ___ millions [insert amount for your state and remove this note] of dollars of assets in our state department of unclaimed property because most people do not leave a clear record of their assets at the time of their incapacity or death.

  1. Consider If You Need to Name New Guardians (Long or Short-Term)

Review your guardian nomination designations. Have you named guardians for both the short-term (local) and the long-term (people you would trust to raise your kids fully)? If so, do they need to change? Is there anyone you would wish to exclude? Does the ID card for your wallet need to be updated? This is the time to check.

 

  1. Check Out the Title to Your House

Get a copy of the deed to your house and make sure that your trust is listed as the owner on the deed, if you want your house to stay out of court in the event of your incapacity or death. If you see your personal name on the deed, and there is not a trust listed, you can be sure that would result in your house having to go through the court process of probate in the event of your death. If you don’t want that, now is the perfect time to spruce up your planning.

 

  1. Come In and Meet With Us For a Family Wealth Planning Session

Last, but far from least, this is the perfect time of  year to come in and meet with us for a Family Wealth Planning Session, whether you’ve done planning in the past or not.  We will have a 2-hour working meeting that will get you more financially organized than you’ve likely ever been before (unless you’ve already done planning with us) and give you the confidence of knowing you’ve made the most empowered, informed and educated legal and financial decisions for the people you love.

 

This article is a service of Katie Charleston, a Family Business Lawyer®. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Family Wealth Planning Session™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session.

 

5 Things Your Lawyer Wants You To Know Now That Your Parents

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You’ve done it.  You’ve taken the leap in to parenthood.  You didn’t quite understand the amount of responsibility that came with becoming a parent until you saw that little squishy face.  Then – wham.  So much to think about, so much to plan for: how to feed the baby; when to sleep train; should the diaper contents be that color (yes, we’ve all been there)?   You may have forgotten the pacifier, the burp cloth or a change of clothes for baby (and you) since that little being came in to your life, and that’s OK. The small things aren’t going to matter in the grand scheme of things.  I’m here to remind you of the things that will matter. As a mom and a lawyer, here’s my top 5.

  1. Naming a long-term guardian. 69% of people have not named legal guardians for their children.  That’s 69% of families who are at risk of their children ending up in the system in the event that something happens to them.  To avoid this, you must sit down and have the difficult discussion about who you want to raise your child in the event you can’t.  It will be difficult.  No one will raise your children the exact way you would.  This is something you will have to accept before you can make your choice about the next best option.
  1. Naming a temporary guardian. So many of the people that do think of naming a guardian only consider long term care, but what about the short term?  In the case that you were unable to make it home from work to pick up the kids or relieve the babysitter, who would care for your children?  In the event that you and your husband finally get that date night you’ve been longing for, and god forbid end up in an accident and are unable to get to the kids, then what?  It is so important, and in fact necessary, that you plan for such events so that your children don’t end up being dragged in to the system.
  1. Giving proper instructions to your caregiver. Naming short term and long term guardians is meaningless unless you give your caregiver proper instructions in the event of an emergency. Does your babysitter know who your named guardians are?  How to find their contact info?  Do they know where your guardianship papers are so that they can provide them to the authorities if necessary?  Your children will only end up with the guardians you select if the caregiver is aware of the named guardians and has access to the paperwork. You can download and use my Caregiver Emergency Sheet here.
  1. Thinking about more than financial resources when naming guardians for your children. Most people I talk to about naming guardians are most concerned with how their children will be brought up.  Common concerns being, religious, political and spiritual beliefs.  Yet, they’re initial instinct is to choose someone with the financial resources to raise their children.  While being able to financially support your child is definitely an issue, your goal should be to name someone that alleviates your fears about not being able to raise your children yourself; and this often leads to a choice, usually the right choice, of someone who will raise your child the closest to how you would if you were able.
  1. Putting a complete Estate Plan in place. A will is not enough.  That little squishy face that changed your entire life will not be completely protected by a will alone.  Wills end up in probate, which is a completely open and public process. Probate can take up to fifteen months, depending on your state.  If you do not have the proper documents in place, not only will your children end up in the system, but a trustee could be appointed by the court to control any assets you left for your child’s support.  It’s best to have a complete estate plan in place, including a trust that will pass assets privately to named trustees that you choose in advance.

It may seem like something you don’t need to worry about because odds are, nothing will happen.  Or it may seem like a daunting task to think of how you want to address these topics.  However, the truth is that if you think about it for just a short time and take a small amount of time out of your day, you can ensure your children are protected for a lifetime.  I wouldn’t want anything less my children and would think it safe to say you feel the same.

To get started, call us today.  (317) 663-9190