One of our partners, a Dutch legal tech company called Ligo was awesome enough to write a blog post on the top legal issues that startups need to avoid. We agree with everything they have to say and HIGHLY recommend checking them out if you are a startup in the Netherlands.
Business mistakes happen- but what if you could avoid a few with some very easy reading and simple due diligence?
From our experience, we have seen these business mistakes to be the most commonly made. 60% of all starting businesses do not exit anymore after 3 years. Starting a start-up company involves taking risks. Fortunately those risks can be avoided with a few simple steps. What can you do to protect yourself and your company?
Avoid the next few very common mistakes.
- Not the right legal form (for your business)
Although the majority of the companies in The Netherlands are registered as a one-man business (Eenmanszaak) or a company with limited liability (Dutch VOF), there is no such thing as a legal separation between these two legal forms concerning the assets of the company and the assets of the entrepreneur. This means that that the creditors of the company can call upon the private assets of the entrepreneur.
A private limited company (Dutch BV) is a separate legal entity with a separate fund for assets. This legal form reduces the chance that your personal assets (for instance your house, car and bank accounts) will be at risk in case your company gets sued or will not be able to pay her debts. By choosing a Dutch BV as a legal form for your business you will be securing your personal assets and making sure you will set a path to be a more carefree entrepreneur.
From a fiscal point of view, a Dutch one-man business or the Dutch VOF could be more beneficial if you make limited profits. So keep that in mind.
- Not doing your research
Determine a clear vision, set goals, do market research and develop a marketing plan. Developing a business plan can help you create a framework. The process of writing such a plan will force you to think about what your vision is and will enable you to put it in words. It will also keep you focused and that will help you during the talks with potential investors.
- Not the right co-founder
Start your business with someone who has a different skill-set than you do. Your best friend does not necessarily have to be your co-founder. You and your co-founder should complement each other. That is how you build the best teams.
If you have not previously worked together, it is not a bad idea to run a trial period before you jump in together. The number one reason for failure amongst startups is a disagreement between the founders.
- Relying on someone’s word
Trying to save time and paperwork by not drawing up a contract? Not a good idea. There is always the risk of someone not holding on to his end of the bargain. While drafting a contract does not have to consume much of your time, skipping this important step of the process can lead to substantial consequences. Make sure every agreement is put into writing. That way you avoid unnecessary risks, endless discussions and uncertainty.
The Ligo website offers you a variety of legal documents which you can download, customize, sign online, send and manage without all that paperwork. Up-front it will take you a few minutes to complete a customized contract, but it will save you tons of money on legal fees if you get into a dispute. Disputes and liabilities can be fatal for your company. You can now try out Ligo for free here! With your account you can download a customized contract for free!
- Not protecting your intellectual property
Do not make it easy for your competition to steal your work and ideas. If your idea is the next big thing, it will be a real shame if you do not have the ownership.
Register your brand, make sure your company owns the copyrights, get patent protection for your inventions and protect your trademark. It is also very important to ensure that all confidential information of the company is protected. Ask everyone who has access to it to sign a Non-Disclosure Agreement (NDA). Besides a NDA you can ask employees to sign a non-competition clause as well as an agreement concerning the intellectual property on works created during working hours.
If you are unable to enforce your intellectual property rights, it could lead to painful and difficult situation if it turns out you do not own the key elements to the success of your company.
Would you like to know how you can protect your company against unnecessary risks?
Start the Legal Checkup here for free. After taking this test you will receive a ‘legal health score’. Within 5 minutes you will know exactly what your company’s status is and what you can do to protect yourself and your company. Don’t let easily avoidable business mistakes get the best of you!