Startup Legal Issues

While a lot of entrepreneurs at least have a basic understanding of the law, most of them fail to think about the legal implications of starting a company. Many startups who are trying to save money on hiring attorneys are turning to online legal service companies who provide low cost “boilerplate” contracts.

However, there are numerous unforeseen pitfalls with using these types of contracts when it comes to ensuring that your new company is legally sound. In general, a new company should be legally sound from the get-go and one of the best ways to ensure that is to consult with an attorney. A good attorney will be able to properly advise you and tailor their advice to your particular situation.

Here are some common legal issues entrepreneurs will face:

Legal Advice For Startups

1. Is my business compliant?

Corporate compliance affects companies in all types of industries. It is important to find out what type of records and other documents should be generated and maintained by your business. The laws, which apply to your business, will vary depending on a range of different factors, such as what type of business entity you are and what state you do business in. As a result, it’s usually important to consult with an attorney to ensure that your company is compliant with any federal and state laws that might apply to you.

2. What business structure should I use?

There are multiple business structures available and using the best structure can be critical to ensuring that your company is successful. For instance, are you interested in having your company go public in the future or do you want to remain a private company? Are you planning on taking on investors or will you be privately funded? What type of growth do you predict your company will have in the future?

The answers to all of these questions will lead to structuring your company in a variety of ways.

3. How should I avoid legal problems with employees?

Generally, every company should limit their liability as much as possible before taking on any new employees. Typically, company owners should have an employee handbook in place and ensure that all new employees sign an acknowledgement form stating that they received the handbook. The handbook should address everything from the company’s sexual harassment policy to the office dress code.

4. Am I properly protecting my personal assets?

It is always important for a company owner to keep their personal and business assets separate. The best way to do this is to maintain a separate business bank account and only pay for business-related items and expenses from your business account. In the event that a creditor sues you, they may be able to seize your company’s assets if they were purchased using your personal funds.

5. How should I structure a partnership agreement?

Many new companies fail due to the fact that there never was a well-written partnership agreement in place that spelled out the duties and obligations of each partner and covered all issues that could have arisen in the future. For instance, will the partners agree all company decisions on unanimously or by majority rules? How much equity will each partner have in the company? How will company assets be split up in the event of dissolution? All of these issues and many more must be tackled and addressed in a comprehensive partnership agreement at the outset of forming the partnership.

6. Am I properly protecting my business name?

A large amount of companies begin using a name only to find out that another company has already been using that exact same name. A company should usually do a trademark search on the web and with the USPTO to ensure that a business name is available. An attorney can help you register your name as well as a logo and assist you with protecting against anyone infringing on your intellectual property.

7. What should I do if I get sued?

In the event that your company is sued, it is ideal to try and settle a lawsuit prior to going to court. An attorney can use their negotiating skills against an adverse party and work towards settling with them and saving your company the risk of going to court and potentially losing your case. In the event that a case cannot be settled, it’s best to consult with an attorney on the best strategy for winning your case in court.

8. Should I use a non-disclosure agreement?

If your company is looking to share propriety information with another company with the intent of potentially forming a joint venture, then it might be appropriate to have a non-disclosure agreement in place. It is important to make sure the non-disclosure agreement is very detailed and lays out exactly what proprietary information will be shared. Otherwise, you might risk losing valuable work to a competitor and cause major setbacks in making your company a success.

9. Are oral contracts enforceable?

Although it’s a common misconception, oral contracts may be enforceable. However, there are some contracts that are governed by the Statute of Frauds, which is a collection of statutes requiring certain contract to be in writing. For instance, under the Statute, which has been adopted in most states, agreements to pay another’s debt, contracts for over a certain amount of money, and contracts that last longer than a party’s life must be in writing. In general, which oral contracts may be enforced, contract law doesn’t favor oral contracts since they’re often difficult to prove.

10. Do I need an attorney or can I do it on my own?

Sometimes, you might perceive a legal problem to be small when in fact the problem can potentially impact your business in ways that only an attorney can foresee. While you can certainly read up on a particular legal issue if you have the time, it’s best to consult with an attorney who can anticipate various legal pitfalls your company might encounter.

For Christian Dennis and Bob Logue, the story of a common neighborhood on the east side of Philadelphia is also a tale of two cities.

For Logue, who is white, Frankford was safe, home to good schools, and full of opportunities. After growing up in the area, Logue embarked on a successful career as a restaurateur, sharing ownership of Philly’s Bodhi Coffee and the wildly popular Federal Donuts.

For Dennis, who is black, Frankford was heavily policed, rife with institutional racism, and devoid of opportunities for upward mobility. The most practical and lucrative employment option available to him—one that was exemplified by the most successful men in town—was selling drugs. He followed suit and eventually landed in prison.

Dennis and Logue are a generation apart in age, and their paths didn’t cross until 2016 at the Community College of Philadelphia, where the 37-year-old Dennis was graduating from the school’s Reentry Support Project (which focuses on students with criminal records). Logue, 55, was serving Federal Donuts at the event, and Dennis’s professor introduced them. “She knew I wanted to own my own business, and she thought that Logue and I had similar ideas about giving back and helping the community we come from,” says Dennis.

Christian Dennis and Bob Logue founded Quaker City Coffee.

Logue, meanwhile, had already been struck by Dennis’s presence as he watched him give a celebratory speech during the graduation ceremony. “He had poise—an ability to speak sincerely about that particular opportunity, and also the opportunities that he’s never had,” Logue remembers. “As I listened, I was saying to myself, ‘This guy has all the same gifts that I have—but what a different life we’ve lived up to this point.’”

The two struck up a friendship that grew stronger over several weeks of coffee meetings. They bonded over their common desire to bridge the racial and socioeconomic divide that had made their experiences growing up in Frankford so starkly different. Before long, they brewed up an idea: to start a coffee roaster and distributor that would help to combat the city’s recidivism crisis (about a third of the inmates released from Philadelphia prisons are rearrested within a year) by hiring formerly incarcerated people.

Though both Dennis and Logue were enthusiastic about the plan, Dennis had some skepticism about his potential business partner’s motivations. “To be honest, I don’t have a strong trust of white men,” he explains. “Even to this day, white men come into impoverished neighborhoods with money, they buy property, they rebuild it, and typically they push out the people that are from there.” But Logue’s sincerity ultimately won him over. “He didn’t have to do what he was doing—with Federal Donuts, he was a partner at a very successful shop,” Dennis says. “So it seemed to me that he was genuine in what he was trying to do.”

They spent a year sketching out the logistics of their venture, conducting research and development and formulating flavor profiles with local roasters. In January 2017, Quaker City Coffee opened the doors of its Center City café and unveiled its online store. They entered their startup to compete at the 2017 WeWork Creator Awards, and their vision won them a $72,000 grant that allowed them, as Logue says, to “come storming out of the gate.”

Initially, the company operated both as a coffeehouse and distributor, with employees working multiple roles including supply clerk, packager, and barista. However, in 2018, Logue and Dennis handed ownership of the café over to an acquaintance of Logue’s who ran other successful coffee shops, and Quaker City exclusively became a wholesale coffee company. “We got back to where we should have been, which was focusing on the brand itself,” says Logue, who felt that the company’s reach would be wider if its efforts focused on getting the products on shelves. “We realized that people aren’t going to travel out of their way to this café because of its social impact,” he says.

Quaker City is one of many companies tackling recidivism—including New York City’s Greyston Bakery (which, like Quaker City, focuses its hiring efforts on formerly incarcerated job-seekers), and Oakland’s CORE Kitchen (a plant-based restaurant partially staffed by formerly incarcerated employees). Like Quaker City, these companies understand the symbiosis that can result when businesses are willing to emphasize not just hiring, but investing in, formerly incarcerated employees. “There are a lot of companies out there that will hire [formerly incarcerated employees] based upon local tax incentives, but commonly it’s a revolving door,” says Logue. “Like, ‘Here’s your minimum-wage job. It didn’t work out? OK, where’s the next person?’”

In contrast, Logue sees the Quaker City Coffee team as a family—and working with the company’s employees, he says, has shown him first-hand the value of that word. “A lot of times, in the world that I come from, workaholism is an accepted norm. Whereas with the folks that I work with, family comes first. It does, above and beyond everything else.” As a result, Logue and Dennis work hard to accommodate special circumstances, like allowing a Quaker City employee to pick up their kids from school midshift so they don’t have to walk home alone. “Quaker City survives by incorporating all of that understanding into our business model,” he adds. 

For Dennis, Quaker City has also been an eye-opener. “Being able to hire a friend of mine who I did almost six years in prison with—that struck a chord with me,” he says. “I can give people jobs. I can try to change their narrative and the things that people say about them.”

The company also boosts his drive. “I believe that the American dream is the pursuit of happiness,” he explains. “Through all of the negativity, through all of the obstacles, every morning I get up, I look at my kids and my wife, and I say, ’Today is going to be the day.’ It’s that pursuit that actually pushes me.”

Maxie McCoy likes to offer a contrarian approach to success. If other motivational speakers preach about the big plan, the personal growth expert advocates starting small. She reckons you don’t always have to look ahead; it’s fine to cast an eye behind you. And for those wrapped up in what other people think of them? That doesn’t have to be a bad thing, she says. Just pick those people wisely.

“You are not alone,” she told the audience and fellow panelists at the “Make It Happen” track at WeWork’s Global Summit for employees in Los Angeles earlier this month. “I have spent the past seven years in rooms just like this, as big as 5,000, as small as 20. It didn’t matter if I was in London, Miami, New York City, or Dallas. The same thing continued to come up, which is, ‘I feel really lost.’”

The author of You’re Not Lost: An Inspired Action Plan for Finding Your Own Way, knows first-hand what it’s like to feel lost—and she knows she isn’t alone. Her audiences are filled with people who feel stuck in life despite accomplishments that might say otherwise. “Every one of these people are creative, well-educated, doing awesome stuff,” she says. “So why are we feeling this way?”

McCoy, who describes herself as a “reformed goal junkie,” believes that the biggest impediment to long-term success is being focused on the end instead the myriad steps that need to happen before getting there.

“We’re scared to take a step because we don’t know where that step is going,” says Maxie McCoy.

“We’re scared to take a step because we don’t know where that step is going,” she explains. “Or we’ve gotten to a cool place in our lives—with the ideal job, partner, body, apartment—but we didn’t actually want it. So now what? What’s next?”

Her approach? Make a determination, every day, to take a small step to make something happen, despite feelings of uncertainty. Small steps build on one another, she said, and cultivate the confidence to start implementing a bigger plan.

“What that is going to create for you is direction,” she said. “And direction is what you’re looking for. We’re not looking for the end destination. It’s reconnecting with our own power to make things happen.”

Sometimes, says McCoy, you might end up looking backward. Reflection on past triumphs can be a terrific motivational boost. “Most of the answers of where you’re going are in the experiences and data of where you’ve already been,” she said. “We just have to take a second to look behind us, to take inventory, and give it merit. All the mountains we’ve moved in the past, for better or worse, mean something. You’ll know what lights you up. You know the things that energize you. They’re here to tell you something.”

McCoy is familiar with the pitfalls of any career path: racism, sexism, homophobia. The key is to not let them reshape you. “If you are trying to fit into someone else’s mold—think of what a mold is, it’s a cold, hard limit,” she says. “You are limiting yourself.”

Instead, solicit feedback from people in your circle of trust, says McCoy. Ask them questions like, “What’s my superpower? Where do you see me in five years? What’s holding me back?” These are the people who believe in you the most, and she promises that eventually your image of yourself, and what they see in you, will match. “You will start to believe what they believe.” And you won’t be lost at all.

Photos by Lauren Kallen

Making products people fall in love with isn’t always full of romance.

Sometimes a match that seems made in heaven can turn into a nightmare. Sometimes everything is smooth sailing—but there are still unexpected bumps in the road. And sometimes, well, you might need a divorce.

Professional heartbreak is real, and it can sting just as much—if not more—than the disintegration of your first great love affair. Creating consumer packaged goods is an especially fraught business: Your success is dependent on everyone else going gaga for your product. Make a hot item, and your company can experience rapid growth—meaning employees often become “absolutely married to their work,”says Josh Wand, founder and CEO of the recruiting firm ForceBrands, who moderated a panel on the subject at The We Company’s Chelsea HQ. But with marriage comes a little heartache and pain. Here’s how five top executives weathered their own storms on their way to success.

When saying ‘no’ leads to millions lost

“When I started with KIND 10 years ago, my hair wasn’t gray,” said John Leahy, president of nut-and-seed-snack business. Early on, a major KIND account asked if the company would make them a private-label bar. Leahy declined: KIND was intent on building consumer loyalty through its own name and logo. A year later, that account said they’d found someone else to make them a private-label bar—and they were dropping KIND from their roster. “Millions of dollars down the drain,” said Leahy. Five years later, another major account was seeking a private label. Again, KIND said no. Sure enough, that account launched their own private-label bar, and dropped some KIND products. Millions more, gone.

John Leahy of KIND: “Weather the storm, fight for what you believe in, and the love will come.”

But Leahy was adamant that the company stay true to who they were, and the business still grew to 250,000 retail outlets from 25,000 in only eight years. Plus, the heartache healed: The first account eventually came back to KIND, and the second started reupping their orders. Long-term confidence is necessary, Leahy said: “Weather the storm, fight for what you believe in, and the love will come.”

There’s no such thing as too big to fail

Oatly originated at WeWork. Well, actually, the vegan, plant-based milk made of oats started in Sweden, but as general manager Mike Messersmith explained, their rapid U.S. climb began in 2017 with only three employees at WeWork 175 Varick St. Their vision was laser-sharp: Focus on local New York coffee shops and edge into the latté market.

Mike Messersmith of Oatly says his company finally got past its “growing pains.”

But Messersmith particularly wanted to get his product into the Irving Farm coffee shop he walked by every morning on the Upper West Side. Victory came early—his sales team got Oatly into the store. “There was a swelling song in the air,” he said. But then: heartbreak. Oatly became such a hit that their supply ran low. “We were not as good at making oat milk as selling it,” he said. The heartbreaking moment came when Messersmith walked by Irving Farm one day and saw a sign on the door proclaiming: “Sorry, there is no oat milk today due to a national shortage.”

He had to reroute his morning walk because the sign made him so anxious—a symbol of his company’s “monumental failures.” But they made it through those growing pains, and Oatly was able to reup production. Now they’re opening a new factory, and Messersmith is thrilled: “I can take a more direct route to the 1 train again.”

Teammates aren’t always dream mates

Companies are rarely built by just one person. But building a team is its own challenge. When she joined the skin-care company Supergoop two-and-a-half years ago as president, Amanda Baldwin was tasked with undoing and redoing a team.

First, she learned to cultivate patience—it took a year to find her own direct reports. “The org chart is a living, breathing organism, especially in a young company,” she said.

“Building a team is about matchmaking,” says Amanda Baldwin of Supergoop.

It’s tough to find people who can jump into the deep end. “Résumés are not good indicators of whether people have the stomach for a startup,” she said. “Building a team is about matchmaking. There are no good people or bad people, there are just the right people for the right job.” When it is the right person, they soar, she said, and the benefits to your own work life can be tremendous.

Battling impostor syndrome—after you’ve made it

Elaine Kellman tastes the flavors. Literally. As head of flavors for Citromax, she creates new flavors for major food and beverage companies.

Fourteen years ago, after a long career working for other companies, Kellman became bored. “The worst thing to do to a flavor chemist is to take away creativity,” she said. So she struck out on her own. But she didn’t realize everything she would be giving up by leaving a corporate structure—no forecasting department, no logistics, no one to talk overhead.

“It’s beyond believing in yourself,” says Elaine Kellman of Citromax. “It’s about believing in the person everyone else believes you are.”

Her first challenge came early, at an industry conference, surrounded by leaders in her male-dominated field. She fought impostor syndrome for days, trying to believe she belonged—until, ultimately, she realized she had just as much experience (if not more) than everyone else there.

“It’s beyond believing in yourself,” she said. “It’s about believing in the person everyone else believes you are.” She’s kept up her creativity by moving her office right next to her flavor lab.

Keep riding the wave wherever it takes you

Luan Pham was head of marketing at Condé Nast Media when opportunity came calling. He quit his job to work on—coffee creamer. But not just any coffee creamer: a nondairy version founded by world-renowned big-wave surfer Laird Hamilton.

“Follow your truth and what drives you,” says Luan Pham of Laird Superfood.

Hamilton was looking for a burst of energy and focus for riding 100-foot waves. He began by mixing his own blend made of coconut milk. But when the company—and early employee Pham—tried to scale the product, challenges abounded. To make the vegan, dairy-free creamer shelf-stable for a year, they had to do extensive tests—and were still manufacturing it in small batches.

Despite a friends-and-family funding round, they were running out of money. At the last moment, they found a mass-manufacturer. Pham is now glad he indulged his entrepreneurial streak. “Follow your truth and what drives you,” he said. And anyone who doubted him? Now they’re eager to follow in his footsteps—especially because Laird Superfood just raised a funding round worth $32 million (including from WeWork).

Graphic by Kelly Sikkema.

When Lisa Ling was a little girl, she wanted to be Marcia Brady. Lisa and her younger sister, Laura, would pretend they were the Brady Bunch—Laura as Jan or Cindy, their grandmother as Alice. “The television was always on in my house,” the journalist and author told the audience of WeWork employees at the “Student for Life” panel discussion at the company’s recent Global Summit in Los Angeles. “It was my favorite babysitter. I had fantasies about being on TV.”

The fantasies that took root in childhood only grew she did. At 16, she landed a hosting gig at a local teen magazine show called Scratch. “Worst name ever,” Ling says with a laugh. At 18, she was hired as a reporter at Channel One News, broadcast in schools nationwide. While at Channel One, she covered drug wars in South America, globalization in China and India, and democracy in Iran.

No longer a little girl enthralled by the glamour of television, Lisa developed a love of reporting. “I wanted to communicate stories,” she says. Her inspiration? Connie Chung. “She was the only Asian person on a national stage, and to me, she symbolized all that is elegant and graceful on TV,” Ling says. “So I set out to have a career like Connie’s.”

“I challenge myself to meet someone new every day and interact with someone entirely different,” says Lisa Ling.

While a student at the University of Southern California, she kept missing classes to go on assignments for Channel One. “I realized I was getting a better education doing what I was doing because I had a unique opportunity to be out in the world,” she says. “For a kid who didn’t have the resources to travel, this was the best education conceivable. I became a smarter person, but really, I became a better person.”

Ling recalls Channel One sending her to cover the civil war in Afghanistan, a country she couldn’t identify on the map, “and most adults couldn’t identify either.” She was just 21 years old, traveling with the Red Cross to Jalalabad. When they landed, they were immediately surrounded by young boys carrying weapons “that were quite literally larger than they were,” she recalls. When she asked how old they were, the local guide responded, “They do not know, but if you ask them how to operate an RPG or bazooka, they know.” This story had the most profound impact on Ling and her career. “That moment in Afghanistan, I realized this is what I should be doing.”

Ling’s career has taken her from Afghanistan to Iraq and even helped her diplomatically fight for her sister Laura’s safe return from the North Korean government. When asked about Laura and her colleague Euna Lee’s imprisonment in North Korea in 2009, she remembers the total fear her family felt—and the delicate way they needed to handle the request for the women’s release. “Never once did we make any accusations on what we believed,” she explains. “It was all about allowing the North Korean government to save face.”

Despite her success, Ling acknowledges there is “a tremendous amount of gender bias in the workplace. That is really undeniable.” While her show, This Is Life with Lisa Ling, has been on CNN for six seasons, she had to fight for it get renewed, and suspected it might have been because “maybe I’m not white and male enough.” Yet everything she’s been exposed to has compelled her to continue telling stories.

“There’s so much out there to acquaint oneself with,” says Ling, who sees herself as a student for life, seeking out new people and experiences every day. “I challenge myself to meet someone new every day and interact with someone entirely different,” she explains, encouraging others to do the same. “You’ll become more open-minded, smarter, and ultimately better.”