Huge Legal Costs Startups Have the Power to Avoid

Confusion is Costly.  Confusion quickly erodes your business, key relationships, and solid legal foundation.

By definition confusion means: disorder, lack of clarity, and chaos.  It's synonymous with distraction, mess and turbulence.  None of these things make business more efficient.

The law allows you to eliminate confusion in your business by written contract.  It rewards those who make the effort and who follow through.

Effort:

  1. Make things clear in written agreements.
  2. Reject agreements you don't understand completely.

Clear Written Agreements

  • You need a founder agreement or company agreement that details essential aspects of your business relationship.  The law does not define this for you.
  • Confusion also commonly arises with expectations concerning intellectual property, trade secrets, nondisclosure, proprietary and confidential information, and duties of loyalty.  The law does not spell this out for you.
  • Use negotiations to learn about who you’re doing business with, especially your partners, investors, friends, contractors, and customers.  This information is most valuable on the front end.  Let them tell you who they are and listen to what they say. 
  • Later is too late.  People’s memory typically serves themselves.  We also typically forget things that don't help us in the current moment.  Documentation refreshes memories, and communicate the intentions before memories were muddled.

Agreements You Understand

  • There are few things worse than learning your agreement doesn’t say what you thought it said, or it doesn’t provide the protection you expected.
  • Beware of Internet Forms (more information noted here).  You need to fully understand your options and the context of how the options may affect your business specifically.
  • Don’t sign documents drafted by someone who does not represent you.  HINT:  Your <partner's, investor's, customer's> attorney doesn't draft with your interests mind.  You need someone to review the documents on your behalf.
  • When you’re ready for legal advice, choose an expert.  Attorneys focused on a specific practice tend to be more efficient and you specifically benefit from their experience with other businesses and within your industry.  The generalist, the litigator or the freebie can turnout to be very costly.  
  • Know your drafter and understand your options before you sign.

Rarely do two people feel the same way about “standard terms.”  While it's true that topically, there are general formulas to legal agreements, there really aren't plain jane "standard terms."  Within each topics the choices you can make are endless, and vary based on your risk threshold and what is standard within your industry.  Your agreement guides how and to what degree your business relationship is protected so give effort to and be rewarded by understanding this and developing your "standards." 

Follow Through

SIGN YOUR AGREEMENTS!

More often than you’d think, people do the work to create the agreements but never sign them.  Even after deploying them via Docusign and sending multiple reminders, some people fail to sign important legal instruments.  This is terrible for your business.  

After contracts are created, people don’t usually go back to them until there’s a problem.  If you dust off your agreement and realize it’s unsigned, you don't have an agreement, and the problem likely just got a lot more expensive.

Cleaning up a mess is exponentially more expensive than getting it right on the front end.  Don't give up the power to control it.