Startup Legal Mistakes: How a General Counsel Can Save You Time and Money


When building a startup, it’s easy to get caught up in the excitement of creating a product or service that will change the world. However, many founders overlook the crucial aspect of legal compliance. Startup legal mistakes can have severe consequences, including costly lawsuits or even putting your entire business at risk.

While startups often face limited resources and budgets, neglecting legal advice and guidance can be detrimental. That’s why hiring a startup general counsel should be a priority for any aspiring entrepreneur. In this post, we will explore some common legal mistakes startups make and highlight how having a general counsel can save you time and money.

Not Establishing Adequate Legal Structures

To set your startup up for success from day one, it’s crucial to establish proper legal structures. One common mistake is neglecting to incorporate your business or failing to choose an appropriate entity type early on.

By consulting with a general counsel, you can ensure that your startup is established under the correct business structure, such as a limited liability company (LLC) or corporation. This step helps protect your personal assets from potential liability and sets the foundation for future growth and funding opportunities.

Ignoring Intellectual Property Protection

Intellectual property (IP) is often at the core of innovative startups. Failing to protect your intellectual assets from infringements can jeopardize your competitive advantage.

A startup general counsel specializing in IP law can assist you in conducting thorough trademark searches and filing patent applications when applicable. Additionally, they will help monitor and enforce your IP rights, preventing others from copying or misusing your valuable ideas.

Neglecting Employment Matters

Startups often operate with limited staff initially, but neglecting proper employment practices may lead to significant challenges down the road.

From drafting employee contracts to navigating complex labor laws, having a startup general counsel ensures you comply with all relevant guidelines while safeguarding your intellectual property rights. Moreover, they can assist with stock option plans and equity compensation, attracting and retaining top talent as you grow.

Overlooking Regulatory Compliance

Regulatory compliance is a treacherous terrain that startups must navigate carefully. Many founders overlook how their industry may be regulated, leading to hefty fines and disrupted operations.

With a knowledgeable general counsel by your side, you can proactively address regulatory requirements specific to your startup. By staying on the right side of the law and understanding any licensing or permits necessary, you avoid potential setbacks that could cost your business time and resources.

Inadequate Contracts and Agreements

Clear contracts are the foundation of successful business relationships. Unfortunately, many startups make the mistake of using generic templates or neglecting necessary clauses in their agreements.

By engaging with a capable general counsel, you receive legal expertise in drafting and negotiating contracts tailored to fit your startup’s unique needs. Having solid agreements in place mitigates risks associated with disputes over ownership rights, deliverables, or payment terms.

Insufficient Due Diligence

When entering into partnerships or collaborations, startups often rush into deals without conducting proper due diligence on potential partners or investors.

A general counsel will conduct comprehensive background checks on potential business partners or investors while verifying financial soundness and reputability. This aspect protects your startup from potential scams or unsustainable relationships that could hinder growth and reputation.


Avoiding startup legal mistakes is essential for ensuring sustainable growth while safeguarding your company’s future. With limited resources at hand, prioritizing a general counsel may seem like an additional expense but consider it an investment that saves invaluable time and money in the long run.

By engaging a competent general counsel early on and incorporating them into your decision-making processes, you can avoid legal pitfalls while focusing on scaling your product/service more efficiently. Remember: establishing adequate legal structures, protecting intellectual property rights, maintaining proper employment practices, complying with regulations, using solid contracts, and conducting thorough due diligence are crucial for setting your startup up for success. Time spent on acquiring legal guidance upfront will undoubtedly have a positive impact on your startup’s journey.