Legal Issues Most Startups Underestimate (Although They Shouldn’t)


Kevin Urrutia




May 05, 2024

Starting a business is a bold step that could lead to serious success, but there are perils involved in the process which you cannot afford to overlook if you want your fledgling firm to thrive in the long term.

Underestimating the legal complications you might face is clearly problematic, and the first step to avoiding this temptation is to arm yourself with the right advice.

To ensure that your startup is built on firm foundations, here are just a few of the most common legal issues which you need to consider.

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Intellectual Property Protection

Safeguarding IP is essential in every business, yet for startups the concerns over copyright, patents and trademarks may be sidelined as other aspects are prioritized.

You do not need to become an expert in US copyright law to best protect your business IP; you just need to make sure that you take the correct steps to stop your most valuable assets from being exploited.

For startups expanding their ventures to different jurisdictions, it’s vital to understand unique patent laws that may apply. Interested entrepreneurs might also want to be familiar with specific patent requirements in Canada, especially as digital globalization brings businesses across borders more frequently. Ensuring your intellectual property is protected wherever your business grows could safeguard against international conflicts and infringement issues.

Registering your trademarks and filing patents is becoming more straightforward thanks to the digital solutions which are available today.

You should also make use of a non-disclosure agreement (NDA) to ensure that any consultants, contractors, partners or other third parties that are involved with your startup early on are bound to keep your secrets to themselves.

If you are wondering what is an NDA, it is a legal document signed to prevent all types of information from being disseminated outside of your organisation. For startups, an NDA can protect intellectual property at a time when the business is most vulnerable.

Employment Rights

Workers in the US can expect to rely on a number of legal rights when seeking employment, many of which focus on eliminating discrimination during the application process. Everything from the gender and race of the candidate to their religious and political views cannot be factored into whether or not they are eligible.

Startups must not only adhere to these requirements during recruitment, but must also take minimum wage legislation in addition to the rules governing how many hours an employee can be expected to work in a given week.

The minimum wage is set at a federal level, with the current baseline sitting at $7.25 per hour. Some states choose to override this and set their own higher minimum wages; in California, this is $12 per hour, for example.

Overtime is another factor to take onboard, since any employee who works more than 40 hours a week is entitled to receive an extra 50 percent an hour on top of their basic hourly wage. Since the average American works 47 hours a week, your obligations to pay for overtime as a business over should not be ignored.

Business Liability

Whatever the nature of the industry that your startup occupies, it will almost certainly have some kind of physical presence. This could be rented office space, a workshop, a warehouse or a number of other bricks and mortar premises.

Regardless of the scenario, as soon as anyone sets foot on your business premises, your organization will be held responsible for making sure that they are safe and unharmed throughout their visit.

If an accident does occur, it is perfectly possible for the injured party to file a liability lawsuit against your startup, which will, of course, become a financial burden as well as having a negative impact on the reputation of your business.

The damages that can be claimed in the event of a successful suit will not just cover things like legal and healthcare costs, but also loss of income that the injured party incurred during their convalescence. For this reason, getting liability insurance is vital, even for small businesses.

Insurance should cover the majority of the expenses that you will face if a lawsuit is filed against your firm. During the early days when you have little financial flexibility, this kind of insurance will be a real boon.

Copyright Infringement

While we have covered the concept of protecting your own IP earlier, startups also need to be conscious of the need to avoid infringing on any copyright or trademark that has been filed by another organization.

This should be taken into account from the very earliest stages, since when you are choosing a name for your enterprise and hammering out the branding that will represent it, you should be wary of steering too close to existing, established competitors.

Aside from aiming to avoid being hit with copyright-related lawsuits that you cannot adequately cope with, this also makes sense from a marketing perspective. You want your startup to be portrayed in a unique, memorable way, so if your efforts seem like something of a half-baked rip-off of another brand, you will have a tougher time gaining traction.

A quick web search will usually help you pinpoint your main rivals and see whether the name and branding you want to use for your business is already taken.


Tax is a reality that every business has to face head-on, as even minor errors can lead to a lot of hassle at the hands of the IRS.

If you do not have the resources to handle business taxes and other elements like payroll in-house, it makes sense to outsource these responsibilities to an experienced accountant. They will not only be able to help with tedious processes like filing taxes correctly and scheduling payments to avoid issues but can also advise you as to the best ways to optimize your business’ tax affairs.

Once again there are different legal ramifications to taxation at a state and federal level, which is why you cannot afford to cut corners or make assumptions. There are also regular changes to legislation in this area, meaning that a qualified accountant will be the one keeping their finger on the pulse so that you do not have to.

There are lots of other legal issues that startups should bear in mind, but, hopefully, you have got enough information to start thinking about this more clearly and carefully.

Author’s Bio: Stewart is a content marketer working with LegalZoom. In his free time, he enjoys playing football and hanging out with friends. 

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