3 Legal Considerations for Future Entrepreneurs

Entrepreneurial ventures can be exciting, fulfilling, and profitable. Whether you’re still brainstorming or your Kickstarter is well on the way to success, you need to be aware of these three legal aspects.

1. Employer Agreements

One of the places you are most likely stumble onto inspiration for a new business is at your current job. However, the law is pretty clear about the division between your business and your employer’s.

If your business in any way competes with your current employer, talk to your boss. Either resign or ask your employer if they are interested in investing. This is the only legally sound course of action (source: Harvard Business School).

The same applies to anyone you hire. Check that there are no conflicts between their employer agreement and their contract with you.

Hiring employees with conflicts of interest opens you up to lawsuits from your employees’ former bosses for breach of contract and copyright infringement.

Even after leaving an employer you are considered a competitor to, you cannot infringe on their intellectual property, trade secrets, or policies. If you’ve signed a non-compete or a confidentiality agreement, talk to a lawyer before you take your business in a direction similar to one taken by a company you or your employees have worked for.

2. Insurance

As you begin your business it’s vital that you protect your investment. The insurance you need will depend on the kind of business you are beginning. For example, physical liability is more important if your employees will be interacting with dangerous chemicals than if they’ll be at a desk from 9 to 5.

Common insurance policies entrepreneurs invest in include:

• Property: Use property insurance to protect your office building from fire, flooding, and vandalism.
• Liability: Liability coverage protects you in the case an employee or customer is injured or their property is damaged and you are found legally at fault.
• Life: In the event of yours or your partner’s death, would your company survive? If not invest in a life insurance policy that benefits your company.
• Worker’s Compensation: Worker’s compensation helps protect your employees from on-the-job injuries. Liability protects you in the case of negligence (such as a loose paving stone that causes someone to trip and fall) while worker’s comp protects your employees from routine injuries. Worker’s comp can help fill in the income your employee will lose while recovering from an injury.

There are consequences for companies who neglect to purchase full insurance coverage. If you have insufficient liability insurance, for example, you may be looking at a lawsuit if one of your customers or employees is injured while on your property (source: Kitchen Simeson Belliveau LLP., a Cobourg lawyers firm).

3. Licensing

Innovation can come with a lot of red tape. What you create will determine what legal paths you need to pursue to protect your investments. You may need to file for a patent (for devices and inventions), a trademark (for your logo and any imagery), and a copyright (for any software, literature, or media your company produces).

Once you have established your patents, copyrights, and trademarks, you will need to work out licensing agreements with your partners. A licensing agreement allows companies of your choice to use your patented work under mutually agreed on terms.

There are two kinds of licensing agreements: a patent license agreement and a copyright license agreement.

Patent License Agreements can be used to allow other companies to market your product or to allow your partner companies to manufacture and sell your products. If your company is a food or drug company, telecommunications provider, or retailer, you will likely need patent license agreements.

Copyright License Agreements regulate the use and reproduction of music, photographs, plays, software, and copy books. If your company deals with literature, music, or trademarked items, you will need to arrange for copyright license agreements.

As you’re beginning your career as an entrepreneur, your life can be exciting and intimidating. Just don’t forget to take care of the legal aspects along the way. Pay particular attention to these three legal aspects to protect yourself, your employees, and your innovations.

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