When I saw Adam Callinan's article about the 3 legal issues that can kill a small business, I was curious to see how the substance of his piece matches up to my recommendations to you these past few months. I'm happy to report that, for the most part, Mr. Callinan and I are on the same page when it comes to the legal risks that entrepreneurs should prioritize:
- First of all, like me, he believes that it is a bad idea to use handshake agreements. Though you may have a personal relationship with the other party you must understand that friendships, etc. don't always last forever, and when things fall apart, then it will just be "your word against theirs...which is unlikely to turn out well for you".
- As I recommend in the Contracts Cheat Sheet, if you don’t have any money to hire an attorney to help you draft an agreement, "should go to our friend “the Internet” and find a template agreement that you can alter to serve your purpose." We actually have quite a few templates on our Cheat Sheet - make use of them!
- Second, is the issue of being careful with intellectual property. Essentially before you build your company around a proprietary asset that will give your company certain competitive advantages, it is important to secure your copyright, trademark or patent (as appropriate). Mr. Callinan gave a great example of what happens to a hypothetical small business owner whose company eventually fail (despite initial success) all because he did not get a patent. Learn more about protecting your intellectual property.
- Third, is something that we had not covered before: how to avoid being sued for “unfair competition”. These types of laws "dictate that you can’t hire an employee from a competitor, then have the new hire use confidential information to take all of the relationships with them." So even if your new employee is not bound by your competitor's non-compete agreement, you have to "restrict them from using their confidential knowledge to solicit accounts."
If you follow this blog, then you should already be up-to-date on the first two issues. And, this third legal trap is pretty simple to avoid. So, it should be pretty easy for you to avoid that legal ditch, right?
