Legal Issues in the Entrepreneur’s Journey 

This blog post was written by Chris Turney, an attorney at Van Osdol KC.  

This article has been written by the law firm of Van Osdol, P.C. for the reader’s general knowledge.   Please understand that nothing in this article should be taken as legal advice for any specific situation. By writing this article, Van Osdol is not intending for any attorney-client relationship to be established and is not offering legal services to the reader. 

Over the next several months, attorneys from Van Osdol will write articles and host free legal presentations at Bridge Space, covering important questions small businesses ask in their entrepreneurial journey.  These same attorneys will also provide a framework for strategically analyzing those questions. We will likely discover, however, that many questions do not have a single correct answer, just some answers that involve more risk than others.   While this reality can lead to anxiety, it also leads to opportunity… it explains why multiple different companies profitably offer similar products in different ways. 

In the broad scope of commerce, money changes hands based largely on risk.   Insurance companies charge premiums without knowing what losses that will follow.   Businesses store inventory without knowing it will be sold.   Manufacturers order raw materials without knowing their product will sell.   The companies with meet success based largely on anticipating risks they incur in exchange for revenues.   For this reason, when a business owner asks a lawyer how to handle a particular situation, an effective lawyer will usually respond with questions.   Those questions are usually strategically posed to obtain facts and data important to the risk analysis.   Are they annoying?   Perhaps.   But recognize that the lawyer needs as much information to provide informed legal direction as an owner needs to make informed business decisions. 

Van Osdol is coming to Bridge Space to present a series of topics that can be placed into two big picture subjects: Setup & Growth and Asset Protection.   These two subjects are mutually dependent, and both must be considered when addressing business-related legal issues. 

Before a business owner decides, for example, whether to invest in forming a corporation instead of operating as a sole proprietor, she must understand the risk of losing personal assets if the business does not meet her expectations.   On one hand, forming a corporation may provide some level of personal protection, credibility, and structure.   On the other hand, it could create negative tax impacts, annual reporting requirements, and setup expenses.   Is the investment in incorporating worth the risk mitigation?   Only the business owner knows how to answer the question after analyzing data points, such as (a) the likelihood of litigation arising from the business; (b) the scope of potential damages that could result from the entrepreneur’s venture; and (c) the relative expense of entity formation in light of likely revenues for the business. 

Another example of risk analysis comes from contract negotiation.   Nearly all businesses will enter into contracts with service providers, material providers, employees, and customers.   Should those contracts contain hold harmless provisions, non-competes, choice of law and arbitration clauses?   Some people may dismiss these clauses as useless legalese, but knowing the potential impact of each of those provisions in future litigation will enable the business to analyze whether to implement those provisions at the company’s inception.

There are several other considerations from a legal perspective, some of which are shown on this diagram.  

As we proceed with this series of posts and presentations, we will evaluate several important “setup and growth” related questions that need to be answered, such as entity formation, financing, tax implications, succession and estate planning.   We will also evaluate the impact of such setup and growth strategies on company assets, and asking important questions about which assets can be protected and how.   In these “asset protection” sessions, we will address contractually protecting the business, securing intellectual property protection, and managing risk for future potential litigation.   While nobody enjoys the vision of being sued, today’s world requires an effective pre-litigation plan to anticipate and control certain risks of becoming involved in litigation as a plaintiff, defendant or unwitting third party. 

The post Legal Issues in the Entrepreneur’s Journey  appeared first on Bridge Space.