Some legal risks need to be avoided to start a successful startup

Successful startup is a journey full of opportunities but also full of challenges. For a new business to operate stably, it not only requires a creative idea and effort, but also requires carefulness with legal issues. Therefore, to build a solid foundation for success, understanding and avoiding legal risks is indispensable. In the following article, Long Phan will mention to readers the legal risks that need to be avoided to start a successful startup.

 Successful startup

Choosing the wrong type of business

Choosing the type of business is a basic and important thing when startups are born. According to the Law on Enterprise 2020, the types of businesses that a startup can be established include:

• One member limited liability company;
• LLC with two or more members;
• Joint stock company;
• Partnerships;
• Private enterprise;

When starting a business, startups often tend to choose a popular type of business but forget to review their business model and financial situation. Choosing the wrong type of business can cause many serious consequences. That affects business operations, management and sustainable development of the enterprise. Therefore, to successfully start a business, startups need to carefully research related legal issues and choose the type of business that suits their business goals.

Choose the appropriate type of business

The cooperation agreement of the founding members is unclear

If the founding members’ cooperation agreement is unclear, it can cause misunderstandings, conflicts of interest or capital and other rights. In addition, startups need to pay attention to other legal risks such as: no agreement between members or oral agreements without supporting documents. Therefore, to avoid the above problems, startups need to establish clear and transparent agreements.

The corporate governance document system lacks transparency

A lack of transparency in the corporate governance document system can cause many harmful effects to businesses such as:

• Lack of trust from investors: If the governance system is not transparent, investors may feel uneasy about the fairness and stability of the business. This can lead to a reduction in investment or the withdrawal of capital;
• Ability to abuse power: Powerful people in the company can take advantage of vulnerabilities to commit wrongdoings that cause damage to shareholders and stakeholders;
• Inconsistent business management: Causes internal conflicts and reduces company performance;
• Businesses easily fall into legal disputes: Due to misunderstanding or non-compliance with regulations, leading to lawsuits and fines.

Therefore, building a transparent corporate governance document system is necessary for a successful startup. At the same time, it contributes to ensuring a healthy, fair and sustainable business environment.

Forgot to register trademark protection for your business

A brand is an asset that a business must spend a lot of time, effort and dedication to build. Therefore, startups should not be so focused on development that they forget the important thing of registering for brand protection. This can cause many serious consequences for businesses such as:

• Loss of ownership: If you do not register for trademark protection, your business’s brand name may be appropriated or illegally used by others. This can lead to loss of ownership and control of the brand, causing financial and reputation loss.
• Difficulty in protecting rights: If your brand name is used without permission, it can lead to legal disputes, causing loss of time and money. At the same time, not having trademark protection registration will make protecting your rights difficult.
• Financial loss: Failure to protect a brand name can lead to loss of customers and revenue. Furthermore, if forced to change the brand name, the cost of changing the entire brand identity, packaging, advertising and related materials can be huge.
• Loss of reputation: If another company uses your brand name for poor quality products or services, reputation can be seriously affected. This can reduce customer trust in the business’s products or services.

Therefore, registering for trademark protection is an important step to protect a business’s intellectual property and ensure the startup’s legal rights.

 Register for trademark protection

Forgetting to fulfill reporting and notification obligations to the authorities

Forgetting to fulfill reporting and notification obligations to authorities causes very serious risks:

• When registering for establishment, an enterprise is responsible for fulfilling its reporting obligations on time, fully and accurately. When violating obligations, businesses may be subject to administrative sanctions according to regulations depending on the nature and extent of the behavior.
• Failure to meet reporting obligations can reduce trust and make it difficult for businesses to raise capital or find business partners.
• Causes legal risks including lawsuits or legal disputes with related parties.

To avoid the above harmful effects, businesses need to ensure full and timely implementation of reporting and notification obligations to authorities in accordance with the law.

Consulting to support successful startup

There are many risks that can occur when startups establish a business. The best way to start a successful startup and limit risks is always to anticipate and limit possible problems. To support customers to successfully start a business, Long Phan provides startup support successful startup consulting services with specific work content:

• Consulting and support for business establishment registration and procedures for changing registration content;
• Consulting on corporate law, drafting documents, supervising and monitoring the company’s business processes and procedures, licensing procedures, etc.
• Legal advice, drafting and preparing documents for new projects;
• Consulting and drafting documents related to internal mechanisms circulating in the company such as charter, cooperation between departments,…
• Consulting and supporting procedures on Intellectual Property and business asset registration;
• Consulting and support for other related administrative procedures.

In the entrepreneurial journey, understanding and avoiding legal risks is extremely important. Understanding the legal issues that a startup business often encounters will help startups limit unnecessary risks. In the above article, Long Phan has generalized the legal issues that startups need to know when starting a business. If you have any questions about the above issue or want to use successful startup consulting services, please call hotline 0906.735.386 for timely support.