No one likes to think about, much less tackle, the potentially tedious tasks that come with the responsibilities of life. That's why so many of us put off doing our taxes or going to the DMV. Often there are things that are more pressing, and if you're honest with yourself, you really don't want to do it, even though you know you're going to have to eventually. Procrastination is easy, especially when you're the driving force of your business. You should be out there leading your employees or dreaming up the next project! But small details matter, especially when they can become big problems. There are a few key areas to mind to prevent disaster.
You don't have to be an employment attorney, but you do have to be aware of your state's laws on the subject if you want to avoid any unwitting violations. (And it never hurts to consult a legal professional in areas where you're unsure.) Beyond being paid differently or working different hours, there are substantive legal differences between contractors and employees, and if you're not careful, you could end up treating both as the same. While you may be asking similar things of both in terms of tasking, treating contractors as employees means that they could potentially be seen as employees under the law, with everything that comes with that status. Be sure to keep your worker groups separate and clearly defined.
Forming a business is more than just coming up with the name or hanging a shingle. In order to legitimize your business, you need to register it as a business entity. For entrepreneurs who aren't well versed in the area, it can seem like a guessing game as to which type to choose. But it's a choice that shouldn't be taken lightly, as you don't get a second crack at it. While the DIY option is cheaper, it can lead to mistakes if you don't know what you're doing. It’s usually a good investment to get assistance from a lawyer to do things right the first time, rather than having to pay later to undo previous errors. Many startups opt for a LLC or C-Corp when forming a business entity, but consulting with an attorney is the best way to determine the correct option for you.
Beyond their employment status, one of the most important things to keep in mind for your hires is fit. Every profession has its own unique culture and people who thrive in it. Conversely, not everyone is cut out for a particular job despite their strengths. You need the right people in order for your company to flourish, and that means being careful with your hiring. Putting together a team that is fraught with arguments and infighting can slow down or even stop your productivity; before you pull the trigger on hiring someone, make sure that it is someone you can work with over the long term.
Disagreements in the workplace can extend beyond employees and into the corporate ranks, such as they might be. Unfortunately it is not uncommon for co-founders to have a disagreement of falling out that leads to one or more parties leaving the company. And beyond the void it leaves in your company's leadership structure, there can be legal and financial ramifications as well. Some startups make the mistake of assigning patents in the name of one of the co-founders, which creates an ownership issue when that person leaves the company. Others fail to account for equity in the case of departure. Before you go into business, make sure that all co-founders have signed a co-founder agreement that covers the event of a co-founder exit. Preparing for the possibility that one of you co-founders will leave, or, less pleasantly, you will have to force them to leave, will keep your company from being thrown into further turmoil.
Ownership of work created for your company is another area where business owners have to remain vigilant. Intellectual property thieves are looking to take advantage of your inattention when they steal your work. Having intellectual property protection like patents and trademarks, as well as cursory internet searches, can help to prevent such theft. And work created by employees or contractors doesn't necessarily belong to you if ownership isn't stipulated in employment agreements. Before you put hours into whatever you're creating, make sure that both your employee/contractor agreements as well as your co-founder agreements address ownership of all work created for your company.
Perhaps the biggest mistake that startups can make is to believe that all of the above issues and more are things that can be dealt with at a later time. Usually, by the time these small problems rise to the level of big problems, it’s too late for your company to try and deal with it in a way that isn’t painful to you and the business. No one has the foresight to know when disaster is about to strike. And while it would be remarkable to be able to avoid it altogether, responsible entrepreneurs take the steps necessary to prepare for the worst-case scenarios that may befall their business. It may seem like a hassle or an unnecessary drain on your limited resources to address areas that you may not think you’ll ever need to worry about, but it costs considerably less to get things right the first time.